Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

JAMES HUGH MAXWELL (NATURALISATION) BILL [Lords]

Ordered,
That in the case of the James Hugh Maxwell (Naturalisation) Bill [Lords] Standing Order 198 (Notice of Second Reading) be suspended and that the Bill be now read a Second time.—[The Chairman of Ways and Means.]

Bill accordingly read a Second time and committed.

SCRABSTER HARBOUR ORDER CONFIRMATION BILL

STORNOWAY TRUST ORDER CONFIRMATION BILL

Read the Third time and passed.

Oral Answers to Questions — NORTHERN IRELAND

Security

Mr. Biggs-Davison: asked the Secretary of State for Northern Ireland whether he will make a statement on terrorism and security.

Mr. Beith: asked the Secretary of State for Northern Ireland whether he will make a statement about the security situation in Northern Ireland.

The Secretary of State for Northern Ireland (Mr. Merlyn Rees): The security situation in recent weeks has seen a continuation of inter-sectarian and inter-factional violence, mainly in Belfast and parts of County Tyrone. The police are achieving considerable success overall but co-operation from the community as a whole still leaves much to be desired.
In my statement to the House on 11th February, I said that the Government were seeking a lasting peace and that a genuine and sustained cessation of violence would create a new situation. If that took place, there would be a progressive reduction in the present commitment of the Army and the rate of releases of detainees would be speeded up with a view to releasing all detainees. As I have also always made clear, anyone involved in acts of violence will be prosecuted in the courts. That remains the position. Whether the cessation of violence is genuine and sustained depends not upon what the Provisional IRA says but upon what it does, and the response of the security forces is, and must be, relates to the situation at the time.
The murder of a member of the RUC in Londonderry, for which the Provisional IRA has accepted responsibility, can have no conceivable justification by the previous arrest and charging of a man, and it has been condemned by all sections of the community. The police are doing everything possible to track down those responsible for this despicable murder. Its effect can only be to slow down progress towards that peace and security that everyone desires.

Mr. Biggs-Davison: Although I welcome, as did the Secretary of State, the RUC successes against sectarian and other criminals, may I ask him whether it is not the case that IRA operations and outrages have continued in, for example, County Armagh despite the so-called cease-fire? Does not that make it blatant hypocrisy for the IRA to excuse the callous murder of Constable Gray, to which he has referred, by alleged breaches of a non-existent agreement on our side? May I ask the Secretary of State to reaffirm that there can be no question of withdrawing from our fellow subjects in Ulster the protection of Her Majesty's Forces?

Mr. Rees: I must make one thing clear because it matters to be right on security matters. In the past three months the amount of IRA violence has been negligible. The amount of violence in Northern Ireland has been by the IRSP and the OIRA and it has been sectarian murders and the inter-factional disputes largely in the Belfast area. That is not to say that I am satisfied that there is a


genuine cessation of violence, but I am extremely concerned about the gangsterdom and the shootings which happen on a large scale even when the IRA's activities are on a very low scale.

Mr. Beith: I thank the Secretary of State for his forthright statement and I strongly support what he said. Does he agree that those responsible for the cowardly murder of Constable Gray placed at risk the fragile peace on which people in Northern Ireland depend for going about their ordinary lives? Does he also agree that those who hold power in the Convention must bear in mind that it lies with them to secure a future of peace and stability in Northern Ireland by making it quite clear to all sections of the community that they will have a part to play in the future Government of Northern Ireland?

Mr. Rees: I am grateful to the hon. Gentleman for his remarks. Given the system that we have in Northern Ireland, which I reported to the House, I shall tell the hon. Gentleman what happened in terms of knowing who did what. The Provisionals complained, through the incident centre, of the arrest of a man. They were informed that he was helping the police with their inquiries and that he was to be charged. It was as the result of that that Constable Gray was shot. The Provisionals were contacted through the incident centre to ask who was responsible for this and we found, in that way, that they were responsible. It did not need a Press statement.

Mr. Wm. Ross: Although the right hon. Gentleman has said that the IRA was contacted through the incident centre and that it was responsible for this murder, what attempt was made to get other information out of the incident centre about the identity of the person concerned? Further with regard to the murder of Constable Gray, is not the right hon. Gentleman aware that since the beginning of this year some 47 shots have been fired at security forces in the Londonderry area and that there have been bombings and many other incidents which indicate that the IRA is still very active? Is not that a very good reason for stopping the releases?

Mr. Rees: There was no way, through the reporting centre, of finding out who had committed the crime. The police

are well aware of the situation, as the hon. Gentleman will know. He is right, of course, about shots and so on. However, I must make the point absolutely clear that in the last three months what has been concerning the security forces who work under me is the inter-factional shootings, killings and bombings which are taking place in Belfast, the IRSP and the OIRA, and the sectarian murders, which are straight sectarian murders. I shall not say aught else about the other activities which go on—activities of a low nature—but it is important that we get clear the fact that in Northern Ireland the security forces are dealing with not merely the Provisional IRA.

Mr. Stallard: Does my right hon. Friend accept that the only real permanent solution to some of these tragic events in Northern Ireland is the establishment of an acceptable police force? What progress, if any, has been made in discussions with both communities as to the establishment of such a police force?

Mr. Rees: Historically my hon. Friend is right. There are real and deep problems about the acceptance of the police force by the minority community. However, whether it is complaints against the police—the Gardiner Report praised the procedures there—or whether it is tracking down killers or murderers, whatever their so-called faith, the RUC has a very proud record. But I must admit that this is the basic problem we face. I should like to think that in my time in Northern Ireland the basic thing that had happened was that genuine policing through the courts was proved to be the way to proceed. It is only through the police force that we shall do that. I give my praise to the police force because I have learned to respect what it does in Northern Ireland.

Mr. Powell: In view of the renewed allegation made yesterday that Her Majesty's Government are in breach of commitments honourably entered into, and in view of the possible implication of what the Secretary of State has just said about the incident centres, how will the right hon. Gentleman protect himself from being blackmailed by the IRA, as his predecessor, the right hon. Member for Penrith and The Border (Mr. Whitelaw), was blackmailed, unless he is prepared to bring this whole matter of


the cease-fire and the incident centres into proper debate in this House or one of its Committees?

Mr. Rees: Regarding the matter of debate, this should be on the Floor of the House, because that is where matters of security should be dealt with. It is not for me to comment on occurrences under the previous administration. I am grateful to the right hon. Gentleman for raising the matter. I rest completely on what I have said to the House. My responsibility is to the House of Commons and to no one else. What I have said clearly and, I hope, concisely in recent weeks is that if there is a genuine, sustained cessation of violence there will then be a progressive reduction in Army numbers. I have said that if it is a permanent end to violence, there could be an end of detention. I have said that screening, photographing and identity checks could be brought to an end, that movement would be easier, that I would not sign interim custody orders and that incident centres have been set up to monitor events. But if people went on acquiring explosives and arms and preparing for violence. I could not regard that as the cessation of violence. I have told the House that sectarian murders and protection rackets must be ended.
I rest completely on that. I can in no way be blackmailed. I have spoken to the House of Commons, to which I am responsible, and I shall continue to do that.

Government Policy

Mr. Gow: asked the Secretary of State for Northern Ireland whether he will make a statement about Government policy towards Northern Ireland following the election of the Northern Ireland Convention.

Mr. Merlyn Rees: Now that the Convention has been elected, it is, as provided for in the Northern Ireland Act 1974, for that Convention to consider
what provision for the government of Northern Ireland is likely to command the most widespread acceptance throughout the community there".
It will then be for Parliament to decide the future constitutional arrangements for Northern Ireland.

Mr. Gow: What time scale does the Secretary of State have in mind for the

recommendations of the Convention? Will he take this opportunity of confirming that there is no question of prejudgment by Her Majesty's Government of whatever the Convention may recommend?

Mr. Rees: The time scale for the Convention is laid down in legislation. It is a six-month period, which can be extended. It would be idle and wrong to come to a decision on what the overall conclusions of the Convention might be, because there will be no majority report; it will be a report of the Convention. It would be wrong for us to predetermine that matter. What would be right is to stick by the words of the Act:
what provision for the government Northern Ireland is likely to command most widespread acceptance throughout community there".
The Government stick on those words. There must be a Government in Northern Ireland which all the people in Northern Ireland can respect and work for.

Mr. Flannery: Does my right hon. Friend agree with me that the terrorism and killing in Northern Ireland are a product of the political situation that has existed there for such a long time and that the solution to this terrible problem is not administrative but political? Does he further agree with me that the Convention elections have tended to consolidate existing positions in Northern Ireland and that, therefore, much of the terrorism taking place arises because this is recognised by the people of both sides in Northern Ireland?
Finally, does my right hon. Friend agree that, in the working out of a constitution, something that has within it an in-built Bill of Rights is vitally necessary for the people of Northern Ireland, so that the process of democracy, from the major community to the minor community, can go on, with all of us watching it, in extending the hand of friendship between the two communities?

Mr. Rees: Yes. What the elections show, and what elections usually show, are the facts of life and not the facts as we would like them to be. My job is to deal with what is, and not with what I would like the facts to be. Regarding terrorism, my hon. Friend is right. There is a very strong political aspect to terrorism. But all I can say is that some of the


results of the terrorism show it to be a different sort of politics from the sort I understand. I should like to make clear to my hon. Friend—this will worry the House of Commons for a long time—that there is now something deeper than that. There is violence for the sake of violence. There are gangs and gangster groups. There are people controlling areas, and young kids controlling areas with guns. I say frankly to my hon. Friend that that will not disappear with the aid of any political charter at all, because it is now ingrained.

Sectarian Murders

Mr. Michael McNair-Wilson: asked the Secretary of State for Northern Ireland what steps he is taking designed to reduce sectarian killings in the Province.

The Minister of State, Northern Ireland Office (Mr. Roland Moyle): It is difficult to identify among the 1,200 persons killed in Northern Ireland since the beginning of 1970 those cases which are sectarian in nature. Every effort is being made by the police to bring to justice those responsible for murders, whatever the motives were, and in response to the recent wave of killings more policemen have been deployed on the ground, the CID has been strengthened and patrols have been substantially increased in areas of high risk. Since 1st January, 47 persons have been charged with murder in connection with 20 murders, 48 have been charged with attempted murder and 126 travelling gunmen have been arrested and charged. In all, 447 people have been charged with terrorist-type offences up to 12th May. But the police are heavily dependent upon the co-operation of the people of Northern Ireland.

Mr. McNair-Wilson: The Minister's last words seemed to me to lead to my question. Surely, if the police are dependent upon the community—this question has already been asked in the House, and the answer to an earlier Question was a fair one—how will the police get the cooperation of the community? What attempt is the RUC making to bring the community into some sort of community police force which would really be so local that the areas controlled by the gangs to which the Secretary of State has

referred would no longer be controlled by those gangs when the incident centres would refer to those areas? For instance, is the confidential telephone still doing the job that it should do? Only this week the Lord Mayor of Belfast said that the RUC was not going to all the places he would like it to go to. How could he make that statement when the Secretary of State and the Minister now say that the police are stepping up patrols? Are there enough police? If there are not enough, how shall we get them?

Mr. Moyle: Recruitment to the RUC has been going rather well since my right hon. Friend's statement last September, as it has been with the RUC Reserve, in which there has been a substantial increase in numbers. There is a scheme for linked police centres of a local nature which can be manned by the reserve, and this is a basis for a local police force. The RUC is adopting every possible method for securing its acceptance in some areas where there has not been the obvious and rigorous level of policing that is sometimes thought to be required. However, it would be idle to pretend that, in spite of the efforts being made, a quick solution will be achieved for this problem, for the reasons to which my right hon. Friend has already alluded this afternoon.

Mr. Kilfedder: On the point of acceptability of the police, what was unacceptable about the activities of Police Constable Paul Gray who was foully murdered last week? Does not the Minister agree that if the SDLP gave its support to the RUC there would be a reduction of violence in Northern Ireland which would prepare the way for perhaps a proper settlement and form of government?

Mr. Moyle: The death of Police Constable Gray was an event we all very much regret. As for the policing of areas and the acceptability of the RUC, it must be borne in mind that the constabulary now is to a very large extent a new force. It has a non-political police authority. It has a member of the minority community at its head. Someone from the Metropolitan Police is the deputy, and in addition at least half the RUC are new to the force within the last five years. At a patrolling level, therefore, it is very much a new police force compared with what it used to be. Everybody should consider whether in these circumstances the RUC


is something which should be accepted everywhere.

Mr. Neave: Does the Minister agree that 50 of the people assassinated since December 23rd died from sectarian murders? Did he hear his right hon. Friend say that he would have to be satisfied that there was a genuine cessation of violence in order to follow his release policy? That is not true, is it?

Mr. Moyle: There is no obvious link between the types of killings that the hon. Gentleman has been talking about and the activities of the Provisional IRA.

Criminal Injuries to Persons (Compensation) Act 1968

Mr. Townsend: asked the Secretary of State for Northern Ireland if he will make a statement on the review of the Criminal Injuries to Persons (Compensation) Act 1968.

The Minister of State, Northern Ireland Office (Mr. Stanley Orme): I would refer the hon. Member to the replies given to the hon. Members for Down, North (Mr. Kilfedder) on 12th March and for Beckenham (Mr. Goodhart) on 13th March.—[Vol. 888, c. 161 and 192.] The review of the operation of the Criminal Injuries to Persons (Compensation) Act 1968 is continuing. A working party of officials has been set up which is in close consultation with the corresponding body set up by the Home Secretary to review the Criminal Injuries Compensation Scheme in Great Britain in the light of its operation since 1964.

Mr. Townsend: Is the Minister unable to do anything to speed up this review, which has been outstanding for all too long? Is he not aware that Service men in Northern Ireland feel they are getting a very raw deal in this matter? Is he aware that hon. Members on both sides of the House are getting very restless about it?

Mr. Orme: There is no evidence that Service men are dissatisfied. One or two aspects have come to light which the Government would like to see removed or improved in cases of future compensation. This is why the working party of officials has been set up. I can assure the hon. Member that there will be no delay in producing a report to the House on this matter.

Several Hon. Members: rose—

Mr. Speaker: Order. I am sorry to have to interrupt, but we must push on. We have only 20 minutes left for all the remaining Northern Ireland Questions.

Outstanding Debts

Mr. Mather: asked the Secretary of State for Northern Ireland what sums are outstanding for the non-payment of rents, rates, car and television licences; and for what other categories sums are outstanding.

The Under-Secretary of State for Northern Ireland (Mr. J. D. Concannon): On 31st March 1975 about £3,765,000 was owed in rents to the Northern Ireland Housing Executive, and about £4,670,000 in rates to the Department of Finance. About £2 million was owed for electricity and £1,600,000 for gas. It is estimated that about £680,000 was outstanding from people who had failed to take out television licences. It is not possible to give a reliable estimate of sums owing for vehicle excise duty.

Mr. Mather: I deplore the continuation of this situation. Will the Minister say how many of these cases are not covered by the payment of debts legislation, and what is the position concerning prosecutions? Are they taking place for non-payment of rents, rates and licences?

Mr. Concannon: I can give only a rough estimate of the proportion of non-payment due to civil disobedience. For electricity it was less than two-fifths, for rents less than one-fifth, for rates less than one-sixth and for gas less than one-eighth. The answers to Questions Nos. 1, 2 and 4 today will give some idea of the difficulty in Northern Ireland of collecting these payments and of following the procedures which are normally adopted in the case of rent, rate, gas and electricity defaulters in this country.

Mrs. Knight: Is it not the case that the reason why a good deal of this money cannot be collected is that no-go areas still exist, particularly in Londonderry?

Mr. Merlyn Rees: indicated dissent.

Mrs. Knight: Will the Minister urge his right hon. Friend to bear this in mind when he starts to think again of letting people out of internment?

Mr. Concannon: There is a problem of non-payment of rents, but it affects not only one faction of the community. It has now spread across the whole community.

Cancer (Deaths)

Mr. McCusker: asked the Secretary of State for Northern Ireland how many deaths from cancer occur in Northern Ireland each year; and if he will make a statement.

Mr. Moyle: In recent years, about 2,700 a year. There has been no significant trend, and the services available to patients suffering from cancer are on a similar basis to those in Great Britain.

Mr. McCusker: What proportion of these deaths is due to lung cancer, and how does the proportion of Northern Ireland deaths from lung cancer compare with the proportion for Great Britain? What action, if any, has the Minister taken on the proposal that was put to him by the Ulster Cancer Foundation, and when does he hope to set up smoking advisory centres?

Mr. Moyle: In 1973, the latest full year for which figures are available, 498 males and 113 females died from cancer of the bronchus and the lungs in Northern Ireland. That is a total of 611. It was the best proportion of deaths to population for any broad region of the United Kingdom. I shall be conveying to my right hon. Friend the Secretary of State for Social Services the resolutions reaching me from the bodies which are interested in this problem in order that there may be consideration of it. In addition, my Department and the Department of Health and Social Services in Northern Ireland will be prepared to carry out co-operation in the investigation of any proposals received from those bodies.

Convention Election

Mr. Molyueaux: asked the Secretary of State for Northern Ireland whether he will obtain a report from the Chief Electoral Officer on the recent Convention election; and if he will make a statement.

Mr. Powell: asked the Secretary of State for Northern Ireland whether he was satisfied with the working of the

electoral arrangements at the recent Constitutional Convention elections.

Mr. Orme: The Chief Electoral Officer is required by the Election Rules to furnish information on the voting to my right hon. Friend within 28 days of the declaration of the result, and as soon as practicable to publish a report, including detailed results, election expenses and any other matters he considers relevant. My right hon. Friend was satisfied with the working of the electoral arrangements.

Mr. Molyneaux: Now that it has been demonstrated that majorities will always tend to elect majorities however the system is tailored, will the Secretary of State give thought to the abolition of the so-called system of proportional representation? Will he also take steps to end the extension of postal voting, which has been shown to be open to abuse? Will the Minister recognise that a return to standard British electoral practices would do a great deal to remove the confusion which has been caused by switching from one system to another several times within a year?

Mr. Orme: Despite the hon. Gentleman's last point, in relative terms this was a high poll in Northern Ireland. The hon. Gentleman may be interested to know that there were 88,000 postal votes as opposed to 136,000 on the last occasion, despite there being only a small reduction in the percentage of the poll. Therefore, many more people felt free to go to the poll to cast their vote. I think that the hon. Gentleman's opening remark was not really worthy of the question.

Mr. McNamara: Is my right hon. Friend aware that those of us who have observed elections in Northern Ireland over the past few years were impressed by the recent election, as a general statement, in terms of the general conduct of the poll? We were very pleased by the absence of the security forces other than normal policing in many of the polling stations. That was something we welcomed. Following the result of the election, will my right hon. Friend confirm that Her Majesty's Government will feel bound by the three principles laid down in the White Paper?

Mr. Orme: The answer to my hon. Friend's last point is "Yes". As regards


the conduct of the election, I hope that hon. Members were extremely pleased that apart from one small incident the election went off without any real difficulty and that the Army did not have to play any major part in it. That reflects on what the hon. Member for Antrim, South (Mr. Molyneaux) said about a return to normal British standards, and we welcome it.

Mr. Powell: Does the right hon. Gentleman recognise that unrestricted postal voting, the original intention of which was to diminish intimidation, is now itself a cause both of intimidation and of malpractice? Will he obtain a report on this subject specially from the Chief Electoral Officer, which will enable him to consider whether in this respect we should not at once secure a return to the standards repeatedly reaffirmed for Great Britain?

Mr. Orme: I thank the right hon. Gentleman for his question and the tone in which he put it. The Chief Electoral Officer, as the right hon. Gentleman knows, is independent, but he will make a report. I can assure the right hon. Gentleman that the Government will consider the postal vote procedure for the future. We recognise that charges were made about postal voting but we have no evidence as yet. We are waiting for a full report, but we have an open mind on this matter and the Government will consider it in complete detail.

Mr. Biggs-Davison: I echo the tributes of the Minister of State and the hon. Member for Kingston upon Hull, Central (Mr. McNamara), whom I accompanied on election day in Mid-Ulster and Londonderry. I welcome the fact that polling stations were open throughout the Province. Is the right hon. Gentleman aware—this is not put in any carping spirit—that in Derry personation agents were still sitting at the presiding officer's table, which I understand is no longer in order in Northern Ireland? While it was good that people were voting in the Creggan, is he aware that we witnessed intimidation and propaganda immediately outside the Holy Name polling station?

Mr. Orme: I thank the hon. Gentleman for those remarks. We will, of course, consider every aspect of the matter. However, I think the important matter for the House is that we had reports from Mem-

bers and the Government have given reports on subsequent elections over the last two or three years, and it seems that the Convention election passed off with the least incident. It did not pass off perfectly but it certainly passed off with the least number of incidents in terms of recent elections. We feel that this is an encouraging sign.

Mr. McNamara: On a point of order, Mr. Speaker. The hon. Member for Epping Forest (Mr. Biggs-Davison) stated that we saw intimidation. We saw what might well have been intimidation and heard reports of intimidation, but we did not see any actual intimidation.

Mr. Speaker: That is not a matter for the Chair.

Labourers' Cottages

Mr. Dunlop: asked the Secretary of State for Northern Ireland what is Her Majesty's Government's policy in relation to rural labourers' cottages throughout Northern Ireland.

Mr. Concannon: After a review of policy on the sale of Housing Executive dwellings, my right hon. Friend has decided that, in general, dwellings should be sold only in areas where the demand for rented accommodation has been met. However, I acknowledge that labourers' cottages form a special category and my right hon. Friend is now prepared to authorise the Housing Executive to sell these dwellings in all areas.

Mr. Dunlop: I thank the Minister for his answer, but I should like to ask him about the cost of the cottages. I believe it is a well-known fact that some families have been living in them for generations and have paid for them twice over in rent. In fixing the cost of these dwellings, can consideration be given to the ability of the tenants to pay if they want to buy them? Will a scheme be initiated that will help them to pay for them over a period? Is that the Government's policy in this direction?

Mr. Concannon: As regards the first part of the hon. Gentleman's question, that is one of the reasons for these dwellings not being part of the normal housing stock as we see it. That is why the decision to sell them has been taken. The price will be the normal market


value as assessed by the Commissioner of Valuation, but we are considering the points that the hon. Gentleman has made and we will probably be coming back to this matter later. In the first instance, we would expect the people concerned to go to the building societies. If that approach is not successful, the Housing Executive will be authorised to create a mortgage on the property.

Mr. Kilfedder: Does the Minister realise that the valuation is set by the district valuer at a figure which only the wealthy can afford and which the ordinary people who occupy the cottages and who would like to buy them have no hope of paying? Will the Minister graduate the selling price to a sitting tenant in accordance with the length of his tenancy? Will he consider this approach?

Mr. Concannon: The average price to the sitting tenant in 1973 was £594. In 1974 it was £767. In 1973 the range was between £250 and £1,825, and in 1974 it was between £170 and £2,700. Therefore, I do not think that there will be a great deal of difficulty in selling the dwellings.

Election Posters

Mr. Stallard: asked the Secretary of State for Northern Ireland what action was taken to prevent the display of election posters on road traffic signs in Northern Ireland during the recent Convention elections.

Mr. Orme: Interference with a traffic sign is an offence under Section III of the Road Traffic Act (Northern Ireland) 1970. No specific evidence is available as to who was individually responsible for putting election posters on road traffic signs, but in the interests of road safety such posters were removed wherever possible.

Mr. Stallard: I thank my right hon. Friend for that reply. Is he aware, however, if we may for a moment leave the security and other problems of Northern Ireland on one side, that Northern Ireland has the worst road accident record in Western Europe? Does he agree, therefore, that the plastering of election placards over every road sign which I saw in the North Antrim constituency during the recent Convention election is

not only inconvenient to travellers—and at some stages it is a gross inconvenience—but introduces yet another road hazard which the Province could well do without? What can be done about this apart from the typical Civil Service reply we have just heard?

Mr. Orme: I thank my hon. Friend for his helpful question. Flyposting in Northern Ireland takes place on a scale which is deplorable. I would ask that my hon. Friend's remarks be directed at all the political parties in Northern Ireland. For those who want normal British standards in Northern Ireland, this is one area in which they might try to achieve it.

Belfast Ring Road

Mr. Bradford: asked the Secretary of State for Northern Ireland if he will make a statement on the time schedule of those phases of the city of Belfast Ring Road programme which affect the constituency of South Belfast.

Mr. Concannon: Not at the present time. The transportation proposals for Belfast are being reviewed and the future of the ring road programme will depend on the outcome of this review.

Mr. Bradford: Does the Minister accept that the housing schemes on the Ravenhill Road, Woodstock Road and Beersbridge Road side of the city, which are long overdue, are delayed still further because of the uncertainty that surrounds the urban link road scheme? Does he accept that there is a scandalous situation of archaic inadequate housing in this area? Finally, will he commit himself to initiating immediately a housing project when the report of the review has been submitted to Belfast Council?

Mr. Concannon: I admit that redevelopment areas 22, 31 and 27 are long overdue for redevelopment. Many other housing proposals are also long overdue. The problem is an enormous one involving 30,000 houses and another 30,000 houses in need of repair and improvement in Belfast alone. That is why I announced my redevelopment programme yesterday. It is a sorry story when I have to announce the nationalisation of all these properties to give the people in the area any hope at all.

Internees and Detainees

Mr. Wm. Ross: asked the Secretary of State for Northern Ireland how many internees and detainees have been released since the IRA truce came into effect; and whether they have been rearrested or detained because of their involvement in terrorist organisations.

Mr. Merlyn Rees: Since midnight on 22nd December 1974, when the IRA cease-fire began, 272 persons have been released from detention. None of these had been re-detained up to 12th May and none had been charged with any offences under the Emergency Provisions Act. Arrests do not always result in charges being brought. Police criminal record files do not state whether the person concerned is an ex-detainee. It would therefore require a disproportionate effort to check all the records to see whether any former detainees had been arrested but not charged during this period.

Mr. Ross: Is the right hon. Gentleman aware that up to the end of last October, out of 1,500 persons released from detention 250 were either re-detained or charged in the courts? What has happened since 22nd December last to change this proportion? Is there evidence either that the police are not as active as they were or that the IRA is not as active as it was?

Mr. Rees: The hon. Gentleman will have heard the figures given earlier by my hon. Friend of the number of police arrests. The rate is a very high one. It would be wrong for the hon. Gentleman to think that the police are in any respect keeping away from former detainees. It may well be that former detainees are not involved in violence.

Mr. McNamara: Is my right hon. Friend aware that many Government supporters and many people in the country as a whole will congratulate him on the firmness and courage he has shown in persisting with his policy of releasing detainees? Is he aware that we look forward to the time when Long Kesh no longer contains any detainees? Whatever personal reservations we may have about internment, we welcome the steps which my right hon. Friend is taking and hope that Long Kesh will soon be empty.

Mr. Rees: I have referred to the 272 releases, and perhaps my hon. Friend will recall the number of detainees released by the commissioners and the smaller number released executively last year. Long Kesh—the Maze—will cease to be used as a camp for detainees only when there are no para-military organizations in Northern Ireland engaging in military activity. When that situation comes about, it will be very easy for me to end detention.

Mr. Neave: Is the right hon. Gentleman aware that, contrary to what his hon. Friend said, it is this aspect of his policy that causes the greatest apprehension to the Opposition? Is he aware that further releases may considerably endanger the situation in view of the build-up of para-military forces of a different kind from those to which the released detainees belong? Is the right hon. Gentleman aware of the evidence that some who are released are being retrained for this purpose?

Mr. Rees: If the hon. Gentleman has any evidence—I am sure he would not have said that if he had not—I shall be glad to receive it. Under the terms of legislation passed by the previous Conservative administration, during last year 361 people were released from detention at a time when the campaign was continuing. The greater number of them were released by the commissioners. When I operate the law that was passed by the Conservative administration I do not understand that when I sign an interim custody order I am creating prisoners of war. There is no prisoner-of-war status for those who are detained. Each one is dealt with on his individual merits. The House would be taking a retrograde step if it were to treat the Provisional IRA as an army and were to convict and lock up its members as if they had army status. That would be wrong and against the law which I have to operate.

Prisoners (Transfer from England and Scotland)

Mr. Carson: asked the Secretary of State for Northern Ireland how many prisoners have been accepted back to Northern Ireland on transfer from England and Scotland since 1st January 1975.

Mr. Merlyn Rees: Six, Sir.

Mr. Carson: Is the Secretary of State aware that when the London car bombers who were sentenced to life imprisonment were returned to Northern Ireland the Loyalist population felt frustrated and annoyed that Loyalists who are imprisoned in Scotland and England had made several requests to be transferred to Northern Ireland but had been refused? Is the Secretary of State also aware that the Loyalist population feel that the reason for this is that it might be an infringement of an agreement with the Secretary of State or his civil servants to transfer Loyalist prisoners to Northern Ireland? Does he not think that the time has come for the return of Loyalist prisoners to Northern Ireland?

Mr. Rees: I know that the hon. Gentleman is closely involved in this matter, but each case has to be treated on its merits. One thing is certain: that demonstrations and the bringing of pressure to bear on me or on one or other of my right hon. and hon. Friends will not work. Each transfer has to be taken on its individual merits. I am extremely grateful to the hon. Member for Armagh (Mr. McCusker), who has presented his case on this subject so reasonably.

Oral Answers to Questions — BRITISH LEYLAND MOTOR CORPORATION LTD.

Mr. Tebbit: asked the Prime Minister if he will pay an official visit to Longbridge.

Mr. Stanley: asked the Prime Minister whether he will pay an official visit to Longbridge.

The Prime Minister (Mr. Harold Wilson): I have at present no plans to do so, Sir.

Mr. Tebbit: Is that not a pity? If the Prime Minister were to go to Longbridge he would find, would he not, that it was a convenient place at which to make a speech to add further power to his remarks over the weekend on the Chrysler strike? Is he not prepared to go there and tell the men at Chrysler that if they persist in a strike that busts their firm they will not be treated in the same way as the

BLMC men have been treated and subsidised by public funds?

The Prime Minister: Chrysler is not at Longbridge. I referred in very strong terms to the Chrysler situation, with which I have been much involved. On 3rd January I gave a warning to Cowley and Longbridge. The hon. Gentleman has dismissed himself from the case of British Leyland by voting against even the first credit given to British Leyland before the Ryder Report. He will be aware that in the provision of urgently-needed capital for British Leyland, including Long-bridge, there will be the strictest monitoring year by year of the fulfilment of the terms of the Ryder Report, including the improvement of industrial relations.

Mr. Carter: I am sure the Prime Minister is aware that there will always be a welcome for him at Longbridge. If he cannot come to Longbridge, will he nip down to Chingford and remind the electors there that their Member of Parliament does not always lead the Tory view on many issues, particularly on British Leyland? Is my right hon. Friend aware that on 18th December, when the House first debated the £50 million support for British Leyland, the official Opposition view was that the Conservative Party should abstain but that the hon. Member for Chingford (Mr. Tebbit) went into the "No" Lobby and voted against the motion? To add to the picture of confusion which then obtained, the hon. Member for Birmingham, Hall Green (Mr. Eyre), the Vice-Chairman of the Tory Party, went into the Government Lobby and supported the motion.

The Prime Minister: Yes, Sir, I am aware that the Opposition on that occasion broke all structural and sartorial records by indulging in a three-way stretch, in which the hon. Member for Chingford (Mr. Tebbit) demonstrated his fundamental opposition to a policy which had been carried through by the previous Conservative Government and in which the official Opposition showed their total virginity in such matters by abstention. As my hon. Friend has said, someone voted himself into the vice-chairmanship of the party by voting with the Government. I am well aware that the official Opposition have no policy on the subject. Even the speech on British Leyland made by the Leader of the


Opposition only added to the confusion about their policy, but in the debate next week they will have a chance of voting one way.

Mr. Stanley: Is the Prime Minister aware that next week the Government will seek approval for the first instalment of £2·8 billion for British Leyland, without providing one paragraph of serious financial information in the Ryder Report with which to be able to assess that investment? Is it not about time that the Prime Minister ensured that the theory of the disclosure clause in the Industry Bill was put into practice in the public sector?

The Prime Minister: I welcome the hon. Gentleman's enthusiasm for the Industry Bill. As regards the debate next week, we shall have a chance to see whether he will vote for the provision of the necessary interim capital and also for the British Leyland Bill. But I am a little surprised at his reflections on the lack of financial investigation undertaken in the Ryder Report. [HON. MEMBERS: "And information."] Yes, and information.
The Opposition will agree that what was not surrendered was commercial confidence, which would have been of value to Leyland's competitors. Surely it was right that that should not have been made available. The report was thoroughly drawn up. In view of the representation on it of two senior members of Hill Samuel and Peat Marwick Mitchell, I am surprised that the hon. Gentleman's financial acumen is greater, in his opinion, than theirs.

Oral Answers to Questions — DISABLED PERSONS

Mr. Carter-Jones: asked the Prime Minister if he will make the Minister for the Disabled a member of the Cabinet.

The Prime Minister: I refer my hon. Friend to the reply which I gave to the hon. Member for Christchurch and Lymington (Mr. Adley) on 24th April.

Mr. Carter-Jones: Is my right hon. Friend aware that if one takes into account the elderly disabled, directly or indirectly about 10 million people in this country are involved in disability? Is he aware that the new techniques of rehabilitation can be applied effectively

to the elderly as well? Will he now give a lead by voting a substantial sum of money and effort to the use of these rehabilitation techniques to provide independence for the disabled and their families? Does he agree that that might be in the national interest as well?

The Prime Minister: My hon. Friend will remember that when he and I attended the publication of the book issued by the Minister with responsibility for the disabled a figure close to the one just quoted—I think it was 7 million or 8 million people, including families—was involved. I am sure my hon. Friend will be prepared to pay tribute to what was done for the disabled by this Government. In current terms, benefits for disabled people have increased by way of additional cash resources—that is, the increase—of £750 million per year. Legislation was introduced to provide for three new benefits, the non-contributory invalidity pension, the invalidity care allowance and the non-contributory invalidity pension for housewives. The legislation for a new pension scheme will be of real benefit to a large number of disabled people, as will the legislation for the mobility allowance. At a time of grave economic crisis that is not a bad record in a period of 15 months. I know that my hon. Friend agrees with that because he has undertaken more pioneering in this matter than almost any other hon. Member.
As to the other points raised by my hon. Friend, he must recognise that what we are committed to here must be a question of priorities in accordance with what the economic situation permits.

Mrs. Chalker: Does the Prime Minister agree that many of the problems of the disabled require a multi-disciplinary team, probably under the direction of the Minister with responsibility for the disabled but with the chance to look at the proposed legislation in the other Departments, so that we do not expend money in a way which discriminates against the disabled and later have to spend more money to put the situation right? Would it not be a good idea and save money in the long term, as was suggested by the hon. Member for Eccles (Mr. Carter-Jones)?

The Prime Minister: I agree with the hon. Lady. I am sure she would agree


that it would not have been possible to make my hon. Friend and his Department responsible for everything affecting the disabled or others in social need. That is why, soon after taking office, I appointed my hon. Friend—in addition to his departmental position—chairman of a committee of Ministers of all the Departments dealing with disablement questions. The hon. Lady is right. This can identify priorities and help in some ways to identify wasteful expenditure. We now hope to extend consideration to the wider field of social service expenditure, about which I hope that before too long we shall have a statement to make to the House.

Oral Answers to Questions — STIRLINGSHIRE

Mr. Canavan: asked the Prime Minister whether he will pay an official visit to Stirlingshire.

The Prime Minister: I have at present no plans to do so, Sir.

Mr. Canavan: Will the Prime Minister tell the paper workers, many of whom are on short time or faced with the threat of redundancy, what steps the Government are taking to try to revitalise the paper industry? Will he also tell the people of Scotland that the Government's plans to bring more jobs to Scotland are being thwarted by the Tories, who refused to allow the Scottish Development Agency Bill to go to the Scottish Grand Committee, and by the Scottish National Party, whose Right-wing industrial spokesman is quoted as saying that the SNP would like to extract all the Socialist bits out of the Scottish Development Agency Bill, thus effectively emasculating it and reducing it to a mere free hand-out scheme of public money to private companies?

The Prime Minister: I am most grateful to my hon. Friend for those pieces of information, especially in relation to the emasculation of the SNP and the position it has taken. Masculine or feminine—I am not surprised about that.
I had not been aware—I confess I missed this through my absence abroad—that the Conservative Party's one positive contribution to Scotland in the past year was to stop the Scottish Development Agency Bill going to the Scottish

Grand Committee. Obviously, now that this matter has been drawn to their attention, I am sure that Opposition Front Bench Members will be much more co-operative in this.
My hon. Friend will be aware that the problems of the paper industry are literally world-wide. As a result of high prices and shortages of materials, the paper industry problem is extremely serious. On 1st July my right hon. Friend the Secretary of State for Industry will be transferring his responsibilities for selective assistance to industry in Scotland to my right hon. Friend the Secretary of State for Scotland, provided that the Conservative Party does not hold up that necessary provision from the Scottish Grand Committee. He will continue to bring to the attention of suitable firms the advantages of location in the Stirlingshire area.

Mr. Crawford: Will the Prime Minister reassure the people of West Stirlingshire about jobs for Scotland by instructing the Leader of the House to bring forward the Scottish Development Agency Bill to the Floor of the House as soon as possible, because the Government are holding it up just as much as the major Opposition party in England? [HON. MEMBERS: "Wrong again."]

The Prime Minister: Perhaps the hon. Gentleman is not aware that a Bill which starts in another place must finish its work in another place before it comes to this House.

Mr. Faulds: Having been educated in Stirlingshire and in Louth—so that I could have got in on the next Question as well—and having discovered as a young man in the coal mining community around Cowie the obscenities of the effects of Tory Government rule, may I ask the Prime Minister to make a more determined effort, by providing stronger and inspired leadership, to rally the trade union movement to stronger commitment to the social contract? It is the people whom he and I represent—not that shower on the Opposition benches—who suffer most from non-compliance with the social contract.

The Prime Minister: Yes. I am grateful to my hon. Friend, especially for what he said about that part of Scotland where he received his education. The coal


mining area in that part of Scotland is well known to me. I have had a lot to do with it in the past. If the Opposition had known about coal, we would not have had the three-day week, would we?
What my hon. Friend said about the Tory and coal owners' treatment of the Scottish coal industry leads me to apologise to him for once criticising his literary style in this House. [Interruption.] It is the view which is so bad from this side.

Mr. Speaker: Order. Is that why the Prime Minister turns his back on me?

The Prime Minister: No, Mr. Speaker. I always find it a more refreshing view when I turn towards you.
Having once criticised my hon. Friend's literary style, I would only say that his use of the word "obscenity" about the Tories' treatment of the coal industry in Scotland was an understatement [Interruption.] Some at least are just too young to have an alibi. My hon. Friend was right in what he said about the social contract. I entirely agree with him.

Rear-Admiral Morgan-Giles: Before the the Prime Minister goes to Stirlingshire, Longbridge or anywhere else where there have been industrial relations difficulties, will he make sure that his right hon. Friend the Secretary of State for Industry does not foul things up first by any more remarks about hating working people?

The Prime Minister: I have been studying over the past few days, while I was away, the valuable contribution made to industrial relations by the hon. and gallant Gentleman's interventions. I noticed his deep interest in industrial relations, and I hope that the whole House will be worthy of his contributions.

Mr. Peyton: While we all understand the Prime Minister's passion for writing and, indeed, rewriting history, may I ask him now to try to face the future with a little more clarity than he achieved last Sunday?

The Prime Minister: If the right hon. Gentleman thinks that what my hon. Friends and I said about the coal industry in Scotland when the Conservative Party was responsible is rewriting history, he does not understand history for a start.
I stand by what I said last Sunday, including the answer to the penultimate

question about a coalition. I said that a coalition would lower the intellectual quality of this Front Bench if we had anyone from the Opposition Front Bench. I also stand by what I further said about the Opposition, in which the right hon. Gentleman now plays so leading a part—indeed, even greater than his qualification in terms of the votes he got when he stood for the leadership—that on not a single matter affecting the country have they produced any policy at all. If the right hon. Gentleman wants to get up now and tell us what the Opposition's policy is on a single item, the House will be delighted to listen.

BUSINESS OF THE HOUSE

Mrs. Thatcher: May I ask the Leader of the House to state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): The business for next week will be as follows:
MONDAY 19TH MAY—Consideration of Private Members' motions until 7 o'clock.
Afterwards, motion on the Prevention of Terrorism (Temporary Provisions) Act 1974 (Continuance) Order 1975.
Consideration of any Lords amendments which may be received to the Air Travel Reserve Fund Bill.
TUESDAY 20TH MAY—Progress in Committee on the Finance (No. 2) Bill.
WEDNESDAY 21ST MAY—Second Reading of the British Leyland Bill.
Motion on financial assistance to the British Leyland Motor Corporation Limited.
THURSDAY 22ND MAY—Supply [17th Allotted Day], when there will be a debate on economic affairs.
Remaining stages of the New Towns Bill.
FRIDAY 23RD MAY—The House will rise for the Spring Adjournment until Monday 9th June.

Mrs. Thatcher: Is the Leader of the House aware that we are grateful to him for facilitating an economic debate on Thursday, but that we take the view


that that does not absolve the Government from providing a day for a debate on the public expenditure White Paper?
Secondly, when may we expect to have a debate on the Gardiner Report, because most hon. Members would wish to have a debate before any legislation consequent upon it is introduced?

Mr. Short: I will bear in mind what the right hon. Lady said about the public expenditure White Paper.
We suggested that a debate on the Gardiner Report could be taken in the Northern Ireland Committee, but I understand that the Opposition were not willing to have that. However, I will try to find an opportunity for a debate on the report on the Floor of the House at some time after the recess.

Mr. Torney: In view of the statement in the Press today that once again the Common Market intends to sell surplus beef to Russia at prices subsidised by the British and other Common Market taxpayers, will my right hon. Friend arrange for a debate in this House on that terrible conduct of the Common Market and the failure of the common agricultural policy to stop that kind of thing?

Mr. Short: Not next week. However, as I pointed out in the recent Adjournment debate, so far in this Session we have spent 10 per cent. of our time debating European matters. After the recess there will be a number of debates on European matters and perhaps there will be an opportunity then to raise this matter.

Mr. Grimond: Before we rise next week, will the Leader of the House indicate the length of the current Session? There are now so many Bills in various stages before Parliament that the resources of the House are over-strained. It is apparent that unless the Session is to be prolonged some will have to be abandoned. Therefore, it would be useful to know what the Government's proposals are.

Mr. Short: This matter has not yet been decided. It will depend entirely on the progress that we make between now and the Summer Recess.

Mr. Spriggs: May I ask my right hon. Friend to arrange a debate on the Finer Report on one-parent families?

Mr. Short: I have answered several questions on this matter on a number of occasions. We had one very short debate on it. However, I agree that this subject merits a debate in the House. I hope that before the Summer Recess I can find time for a debate on this important report.

Mr. Maxwell-Hyslop: Will the right hon. Gentleman arrange for the Minister of Agriculture, Fisheries and Food to come to the House next week and announce the implementation within Britain of the oil price subsidy to support our glasshouse industry which he supported only last week in Brussels?

Mr. Short: I appreciate the hon. Gentleman's concern and that of many other hon. Members on this matter. I will convey his remarks to my right hon. Friend the Minister of Agriculture, Fisheries and Food.

Mr. Noble: Will my right hon. Friend give consideration to a debate on the footwear industry in view of its critical situation, particularly the announcement yesterday of 750 additional redundancies and the fact that over 40 per cent. of the labour force has been working on short time for the whole of this year?

Mr. Short: I made some comments on this subject in the recent Adjournment debate. I will bear in mind what my hon. Friend said. As he knows, the Government are studying the footwear industry together with the textile industry at the moment.

Mr. Donald Stewart: In his winding-up speech on Tuesday the right hon. Gentleman helpfully suggested that he might try to fit in a debate on the fishing industry. Has he given any further thought to that matter? If so, will he indicate on what date it will take place?

Mr. Short: I cannot indicate a date. Certainly it will not be before the recess. I will bear in mind the point made by the hon. Gentleman. This is an important matter about which many hon. Members are concerned.

Mr. Ashton: As legislation is crowded in the pipeline, will my right hon. Friend confirm whether it will be possible for the House not to prorogue in November, but to keep going perhaps until next spring? Will he examine this possibility rather than let complicated Bills fall and have to start again in November?

Mr. Short: There are problems. Naturally my right hon. Friends and I have looked at this kind of possibility. There are problems about Supply, and so on. It is much too early to talk about the length of the Session. I hope before the Summer Recess to give the House some indication of the end of the Session.

Mr. Charles Morrison: May I ask when the Leader of the House will find time for a debate on the recent White Paper on agriculture? Secondly, in view of the reply that he gave to my hon. Friend the Member for Horncastle (Mr. Tapsell) last week, in which he asked for support from the Opposition, may I ask what he intends to do about Early-Day Motion No. 466 entitled "Co-operation to Defeat Inflation"?

[That this House notes that 491 honourable Members on 7th May combined to defeat a left-wing attempt to denude Great Britain of adequate means of self-defence; and trusts that this large majority will find other occasions to work together in the coming weeks, in the belief that Great Britain's only hope of preserving sanity and democracy depends on the willingness of all moderate politicians to work together to defeat inflation.]

Mr. Short: I will bear those two points in mind, and if we can find any time to debate the White Paper, I will arrange that. It is a suitable subject for a Supply Day, of course. The Tory Party, the party representing agricultural interests, still will not have a debate in Supply time on agriculture. As I have said almost every week, the time for general debates is divided pretty evenly between the two sides of the House. It is time that they used one of their Supply Days to debate agriculture.

Mr. Wigley: Will the right hon. Gentleman give some indication whether we shall be allowed time for a debate on the steel industry, since many areas, par-

ticularly in Wales, which are threatened with job losses are worried whether the policy comes direct from the head of the British Steel Corporation or whether it reflects Government policy?

Mr. Short: I said the other day that, in the first week that we come back after the recess, there will be a debate on the Statutory Corporations (Financial Provisions) Bill, which will provide an opportunity to debate steel questions. However, I am sure that we are all grateful to the Opposition for offering to debate steel in Supply time. There will be a Supply Day shortly after the recess, so perhaps they will make that available for a steel debate.

Mr. Terry Walker: Could I impress on my right hon. Friend the need to discuss footwear next week, since yesterday 200 of my constituents were given redundancy notices and these same people have been on short-time working for about nine months? We must discuss this matter to see whether quotas can be arranged to stop the imports at present flooding the market.

Mr. Short: The question of imports is the most complex problem for a great trading nation like Britain—one of the greatest in the world. It is not to our advantage to restrict the flow of world trade, but I certainly recognise the problem here. I am afraid that the only opportunities next week will be Adjournment debates, the subjects for which are entirely a matter for Mr. Speaker.

Mr. John Page: Will the right hon. Gentleman give an undertaking that none of his right hon. Friends—particularly not the Secretary of State for Industry—will come to the House on the Friday we rise to make statements—a practice which has become habit-forming—since it would be impossible on that day to move the Adjournment of the House under Standing Order No. 9?

Mr. Short: I realise that the last day before the recess is an inconvenient date for statements, but it is a sitting day and any urgent statement would have to be made then if it could not be made earlier. But I will bear in mind what the hon. Gentleman has said about avoiding statements on that day as far as possible.

Mr. Lee: May we be assured that we shall have a debate on employment prospects in the West Midlands, bearing in mind the deteriorating situation there, the fact that it is not confined to Leyland and also the fact that next week's economic debate, although wide ranging, will not give scope to do justice to this grave problem, which concerns many of my hon. Friends and me?

Mr. Short: I hope to put down a motion on a suggestion I made for regional debates the week that we return after the recess. This will enable the House, sitting as a Committee, to debate these matters in an early part of the day.

Mr. Kilfedder: With the frightening increase in redundancies in Northern Ireland and the consequent hardship for the unemployed and their families, would the right hon. Gentleman urgently convene a meeting of the Northern Ireland Committee so that the economic crisis facing the people and industry there may be debated, even though he may not get unanimous consent for the calling of such a meeting?

Mr. Short: Really, this is a bit much. We set up the Committee, and, as I said in the debate on the Whitsun Adjournment last week, the Secretary of State wrote to the hon. Gentleman suggesting a number of positive subjects—to which the one that he has mentioned could be added, I am sure—but so far he has had no reply. We want to follow the practice in the Scottish and Welsh Grand Committees of agreeing the subjects for debate with Northern Ireland Members. If the hon. Gentleman would consult his friends, agree on a subject and contact the Secretary of State, I am sure that there could be a debate on unemployment in Northern Ireland.

Mr. Cant: Are the Government fully seized of the critical position in the steel industry? Is my right hon. Friend aware that meetings have been taking place this week in Wales, England and Scotland, which will be concluded in Cardiff on Friday? If the outcome of the meeting next Monday between the British Steel Corporation and the TUC steel committee is not favourable, on Tuesday steel production in this country will come to a halt.

Mr. Short: I have said a number of times that I think that this matter should be debated in the House. There will be an opportunity soon after we come back, but if that is not adequate, I will try to find more time for it.

Mrs. Knight: Can the right hon. Gentleman tell us when the Children Bill will come before this House? He will be aware, I trust, that it came down from the other place some time ago.

Mr. Short: That is an important Bill—which I mixed up with another one last week when I was asked a question. It has finished its passage through another place and is awaiting a Second Reading here. The hon. Lady may be assured that this important Bill will be brought forward for Second Reading as soon as possible after the recess.

Mr. Skinner: Can my right hon. Friend give a guarantee that the legislation on Members' interests will be introduced shortly whether or not the Session goes on for a long time? Would he also give a guarantee that, whatever delay there is, it will be introduced before Members' salaries are increased?

Mr. Short: As far as anyone can guarantee anything in this world, I give a promise that that order—it is not legislation—will be introduced shortly after the recess. It is only because of the pressure on parliamentary time, largely because of the referendum and the renegotiation, that we have not been able to find time for it. I regret that very much, but it will be introduced as soon as possible.

Mr. Adley: May I repeat the request of my hon. Friend the Member for Devizes (Mr. Morrison) that the right hon. Gentleman should arrange a debate on Early-Day Motion No. 466, aimed at defeating inflation? Is he aware that the Prime Minister's performance just now was disgraceful? Will he tell him so? Will he tell him that we expect Mike Yarwood to play it for laughs but not the Prime Minister, and that the right hon. Gentleman might occassionally treat the House and the nation with the seriousness that our situation deserves?

Mr. Short: I have already announced that there will be a full day's debate on economic affairs next week. That will


be an appropriate opportunity to debate these matters.

Mr. Molloy: Is my right hon. Friend aware that the statements attributed to the EEC Commission and mentioned just now by my hon. Friend the Member for Bradford, South (Mr. Torney) fly in the face of assurances that my right hon. Friend the Minister of Agriculture has given this House? Therefore, either my right hon. Friend is open to the charge that he has misled the House or the Commission in Brussels has lied to him. In consequence of these reports of the beef mountain and the sale of food to the Russians, which will affect every family in this country, and in the light of the possible charges which could be laid against my right hon. Friend or the Commission, is it not high time that we debated this issue?

Mr. Short: I am sure that neither of those things is correct. I am sure that my right hon. Friend has not misled the House, nor do I think that the Commission in Brussels has lied on this matter. However, I realise that some of my hon. Friends are concerned about it, and I will draw my right hon. Friend's attention to what has been said.

Mr. Biggs-Davison: As the right hon. Gentleman himself has suggested, is not the situation regarding the Northern Ireland Committee extremely unsatisfactory? Is this not a Committee which concerns the whole House? Would he, therefore, consider publishing all the exchanges next week so that we may judge what has been happening?

Mr. Short: These have been private letters, but I have told the House that we wrote to the hon. Member for Down, North (Mr. Kilfedder) some weeks ago—about the middle of April, so far as I can remember—suggesting four or five subjects and inviting hon. Members to discuss a subject for the first meeting. But so far there has been no reply. I hope that Northern Ireland Members will get together and decide on the subject that they want to debate, and reach agreement with the Secretary of State. Obviously, he has to agree to the subject as well. I am sure that this can be done, and I hope that it will be done. I very

much regret, after the House took the trouble to set up the Committee that it has not even met yet.

Mr. Kinnock: Will my right hon. Friend reconsider his answer to the hon. Member for Caernarvon (Mr. Wigley), when he expressed the hope that the Opposition would devote a Supply Day to a debate on steel? Is he aware that the Tories are hardly likely to do so, since in the Welsh Grand Committee last week the official spokesman said that he accepted 9,000 redundancies in Wales, which presumably means that the Opposition accept the prospect of 20,000 jobless in steel in the near future?

Mr. Short: I understood that last week the Shadow Leader of the House offered a day. I know that the offer was made if we could make a Supply Day available before the recess, but as he was willing to debate steel on a Supply Day my right hon. Friend the Chief Whip and I were willing to make a Supply Day available after the recess. Perhaps the Opposition will consider having a debate on steel then. There is the debate on the Statutory Corporations (Financial Provisions) Bill. If that is not sufficient, I shall somehow or other find another opportunity very quickly.

Mr. Peyton: May I remind the Leader of the House that what I offered was that if he would make a Supply Day available before the recess we would use it to debate steel, because we wanted to give the Government an opportunity to explain away some of their embarrassments on steel? Since then, in our generosity, we have still made available that Supply Day, but we have considered it desirable that the Government should have an opportunity to explain their even greater embarrassments on the economy. The offer does not by any means stand.

Mr. Short: I am very sorry that it does not stand, because the problems of the steel industry stand. All that we had, then, was a little gimmick, a little manoeuvre, not a genuine offer of a debate on steel. The problems of the steel industry still exist. If the Opposition were willing to make available a Supply day before the recess, surely they are willing to make one available after the recess.

Mr. Kilroy-Silk: Does my right hon. Friend recall that we have been promised a Bill to ban the barbaric activity of hare-coursing, much of which unfortunately takes place in my constituency, and a Bill to abolish the tied cottage, which will affect hundreds of my constituents? Will he give an assurance that the Bill to abolish tied cottages will take priority over the hare-coursing Bill, desirable as the latter is?

Mr. Short: I cannot give an assurance that the Bill to abolish the tied cottages will take priority over the Bill to ban hare-coursing. The Bill to ban hare-coursing has been introduced, and it will be down for Second Reading shortly after the recess.

Mr. Tebbit: Will the right hon. Gentleman tell us whether the long delay over the relevant legislation indicates that the Government have abandoned their proposals for the nationalisation of the aerospace and shipbuilding industries, or just that they are too embarrassed to put them forward at present?

Mr. Short: The hon. Gentleman has not been reading his papers. We have already put them forward. The Bill has been introduced.

Mr. Tebbit: Yes, but Second Reading has not been announced.

Several Hon. Members: rose—

Mr. Speaker: Order. I am afraid that I cannot accommodate the late-comers.

Orders of the Day — FINANCE (No. 2) BILL

(Clauses 5, 17, 23, 25, 28, 49 and 60)

Considered in Committee.

[Mr. GEORGE THOMAS in the Chair]

Clause 5

VEHICLES EXCISE DUTY: GREAT BRITAIN

3.51 p.m.

Mr. Peter Fry: I beg to move Amendment No. 4, in page 6, line 3, leave out '5'and insert '4'.
First, I apologise to you and the Committee, Mr. Thomas, and especially to the Minister, for the fact that after speaking to the amendment I shall have to leave the Chamber, as I am a member of a Select Committee sitting upstairs. But I hope that my hon. Friends will push the amendment to a Division.
The amendment would have the effect of leaving the excise duty on motor cars at the previous level of £25 instead of increasing it to £40 as proposed in the Budget.
I am not trying to be irresponsible. I fully realise that public expenditure must be cut and that taxation as a whole must probably be increased. But that object could have been attained in other ways. For example, the cut in VAT from 10 per cent. to 8 per cent., and the introduction of food subsidies, both designed to help produce a certain result in the General Election, cost about £1,000 million. The increase in the car excise duty is estimated by the Chancellor of the Exchequer to raise about £209 million.
The criticism that many of us make of this tax increase is that it is yet another blow at the motorist. Far from being equitable, it is extremely unfair in its incidence. Between October 1973 and March this year the cost of petrol doubled from 37p to 74p for four-star petrol. No less than half of the increase is accounted for by tax—22½p in excise duty and 25 per cent. VAT. The majority of motorists have come to feel that the increase in the tax on fuel alone is more than enough.


The new imposition on the road fund licence is a further severe blow.
I understand the argument that the increase of 60 per cent. is less than the average rise in prices generally since the last increase, but the burden of taxation on the motoring public must be considered in total and not on one element alone. The colossal increase in motoring expenses has substantially raised the cost of living for all sections of the community, and it will undoubtedly encourage more demands for higher wages.
The increased cost of motoring especially hurts those sections of the motoring public who can least afford it. For many people, owning a motor car is not a luxury but an essential. I am not talking about the owners of Rolls-Royces or those who use company-financed cars. Car ownership is far from being restricted to the better-off. It is estimated that 64 per cent. of families in the socio-economic groups D and E are car owners. It is not surprising when one considers that unless people in rural and semi-rural areas are to live lives of almost complete seclusion, they need some form of transport. In most such areas public transport is progressively being cut. In my own county, for example, the National Bus Company is already proposing reductions in services later this year.
Although the system of transport grants and passenger subsidies under Section 34 of the Transport Act 1968 was supposed to deal with the problem, it has so far failed. The transport grants are insufficient. They must cover road building and maintenance of all but trunk roads as well as public transport subsidies. Most local authorities, because of the pressure on local government finance, have shied away from making sufficient grants to halt on any significant scale the long and sorry decline in public transport in many rural areas.
Many of my constituents find that unless they are prepared to travel considerable distances, local job opportunities are not available. That means that the state of public transport has made a car essential.
In rural areas the car is also the only way to lead a reasonable family life. Mobile shops are being priced out of

existence, and many post offices and small shops are being closed or are closing. To have any choice in shopping and entertainment a degree of mobility is necessary. Often a young wife with small children will find herself almost totally isolated once her husband has taken the family car to work.
The Government should start to take a good look at what is happening in many of the villages and hamlets. Many of my constituents would be pleased to earn the £55 a week that one striking worker recently considered derisory. Many young people in the lower income groups find it impossible to continue to live in small, isolated places because of the cost of getting to work. Therefore, they tend to leave for nearby towns, with consequent pressure on housing accommodation there. That kind of movement is bad for village life. It increasingly means that the village becomes a less balanced community.
The people who are left are often the elderly, the pensioners, who are made even more immobile by the increasing isolation of their village. For many of them a small car is the only means of contact with the doctor's surgery, the chemist's shop, the market town, even the post office now, and certainly the local office of the Department of Health and Social Security, which can be many miles away.
These are the two sections of the population who are most hit by the Government's proposals. The owner of an average small car, averaging some 30 miles per gallon, who drives that car for the average distance of 9,000 miles per annum, is, in effect, by paying the extra £15 in duty, paying an extra 5p per gallon on his petrol. One who uses his car for a smaller distance, such as a pensioner, pays an extra lop per gallon as a result of the increase, if he, for example, does 4,500 miles per annum. That is converting it into terms of petrol consumption.
4.0 p.m.
I suggest that those increases are considerable. It is rather interesting to note that the recent Labour Party study into Transport Policy, produced in the April edition of Socialist Commentary said:
No case can be made on transport policy grounds for increasing the level of revenue to be raised from road users.

Mr. Douglas Crawford: Does not the hon. Gentleman agree also that the situation is very much aggravated by the fact that bus services in the rural areas have been decimated? In my constituency no bus services exist at all.

Mr. Fry: I quite agree with the hon. Gentleman. Therefore, this increase can in no way be dictated on transport grounds. The intention of the Chancellor of the Exchequer was obviously to use this tax increase merely as a way of putting up his own revenue. This is exactly where the proposal has been so unjust. One of the side effects of the heavy cost of motoring is not that many motorists will give up owning their cars. Indeed, the very core of my case is that they are usually unable to do this. They will be forced to economise in others ways. They might try to avoid paying the road fund licence fee at all. The hon. Member for Newham, North-West (Mr. Lewis) had much to say on this subject on Budget Day. They may delay the regular servicing of their cars. They may do the servicing themselves, without noting the dangerous faults that often lead to serious accidents, with the consequent effect on road safety.
Others—perhaps this is the majority—may find themselves faced with a shortage of cash and defer buying a replacement vehicle. The British motor industry is so depressed at the moment that it can well do without any further disincentive to car sales in the home market. It is a very odd set of priorities which leads the Government to increase the excise duty—an increase which will help to depress the motor industry—and yet at the same time to propose investing £14 million of public money in British Leyland. They have also hinted at an intention to help the Chrysler Corporation.
At a time when public expenditure should be cut, surely the Government should control their actions to lessen the need to pour millions of pounds into the motor industry. The Government should reflect that even when this capital injection has been made, the cars when manufactured will have to be sold, otherwise the investment is wasted.
This amendment is not just an attempt to champion a popular cause against the Government of the day because we on

this side of the Committee are in opposition. I have no wish to emulate the many hon. Members opposite who, when they were in opposition, declared that high wage increases did not cause inflation. This amendment is a genuine attempt to show the Chancellor of the Exchequer that he has acted wrongly in increasing this particular burden on the motorist. He has acted without a sense of justice and discrimination. The amendment is a plea on behalf of the private motorist whose car is essential for work and contact with the rest of society.
Bearing in mind that well over 50 per cent. of the private cars in this country are either company owned or have some mileage allowance paid on them, it is clear that much of the cost of the increase in the excise duty will be passed on in the way of higher prices. My plea, therefore, is for the truly private motorist—the kind of person for whom one would have expected a Labour Government to have some consideration. The refusal to recognise the plight of many of these people in areas outside towns is a sign of the lack of foresight and understanding by the Government in operating their financial system. I suggest that by introducing this increase, the Chancellor is following a policy which is unrealistic, unthinking and unfair. I very much hope that my hon. Friends will press this amendment to a Division.

Mr. Tony Newton: I support my hon. Friend the Member for Wellingborough (Mr. Fry) with some enthusiasm. My name, too, is on this Amendment. I wish to support his case as strongly as I can under a number of heads.
First, it seems to me that what the Government have done is socially unjust. This is the kind of argument that I would hope would appeal to hon. Members on the Government benches, were there anybody on them who appeared to be taking any interest in this matter at all.
The Leader of the Liberal Party argued in the Budget debate that it was manifestly unfair that there should be the same tax on a Mini as on a Rolls-Royce. He put forward some tentative figures as to what the tax should be on a Mini and on a Rolls-Royce. I do not go along with him in his conclusion that there ought to be different taxes for different sizes of cars, because I think that would cause


considerable difficulty and anomalies for the motor industry. I thought it was quite fair for the Financial Secretary to say, in that same debate, that this differential taxing of cars according to their size was removed at the request of the motor industry soon after the war.
But, whatever conclusions one draws there can be no doubt that the right hon. Gentleman was right in saying that it is manifestly ridiculous that there should be the same flate-rate charge on a Mini as there is on a Rolls-Royce. This is partly because, leaving all else aside, a flat-rate charge of this kind hits at the owners of small cars by comparison with the owners of large ones. The owners of small cars tend to be the less well-off. It hits at the less well-off people, who tend to use their cars rather less, by raising their overhead costs. It hits at those who can only just afford to use their cars and may be on the verge of being forced to give them up altogether.
I cannot believe that that is the kind of policy the Government or hon. Members opposite would support. It is a regressive kind of policy which I would not be prepared to support.
Secondly, it clearly does nothing whatsoever—my hon. Friend the Member for Wellingborough has touched on this—to alleviate the present problems of the United Kingdom car industry, with which we are all more than familiar. In the Budget debate, both the Financial Secretary and the Chancellor of the Exchequer put forward the very pessimistic argument that the British car industry was so sick at the moment that encouraging the demand for small cars would worsen the whole position of this country in the market. I doubt whether that is true. I leave aside the point that one who has been described by the Prime Minister as an "Old Testament prophet" is apparently to rescue the car industry from these difficulties in any event.
Whatever one thinks about the immediate prospects, there can be very little doubt that the structure of our motoring taxation may be one of the reasons why the British motor industry is not doing better in the small car market than it is at present. I do not believe that the situation can be used as an argument for saying that nothing is to be done about this and no adjustment made to the weight of

our motoring taxation so that it is further in favour of the small cars. It seems to me to make sense to move further and further in that direction in order to encourage the British motor car industry to improve its performance and its stake in that part of the market.
I noted in particular that the Chancellor said in winding up the Budget debate that loading the whole of the weight of this tax on to petrol, rather than on vehicle excise duty, was the kind of move that might make sense in a year or two. I am open to argument about whether it is sensible to do it now or in a year or two. But it cannot be argued, if it might make sense to move in that direction in a year or two, that it makes any sense at all to be moving in the opposite direction now, which is what the Budget has done.
Whatever else may be said about this aspect of the Government's proposal, it cannot help our motor car industry at a very difficult time in its affairs to add still further to motoring costs. It can only tend to reduce the market for its vehicles when it needs the biggest market that we can provide for it as the basis for reorganising its affairs, expanding its investment and improving its efficiency, which are objectives that we commend on both sides of this House.
My third point relates to energy and import savings. I do not pretend that this tax increase is likely to have a dramatic effect one way or the other in this connection. But it runs directly counter to any sensible policy for saving energy and for decreasing oil imports. It shifts slightly the weight of taxation in favour of high fuel consumption large cars. In economic terms, it increases the fixed cost of running a car in comparison with the marginal cost—that is, mainly the cost of petrol. That cannot be justified in circumstances in which one of our paramount objectives is to reduce the consumption of energy and the amount of oil that we import.
The fourth and most important argument in favour of the amendment is that to which my hon. Friend the Member for Wellingborough devoted the greater part of his speech. It is the effect on the motoring public in general, especially on those who live in our more rural areas.
Increasingly, as we have watched the performance of the present administration,


we become aware that one of their shortcomings is that they put monotoring into the category that they describe as luxuries to be attacked by fiscal policies. It is significant that they have tidied up the VAT situation in this Bill by including petrol in the Schedule to this Bill of those items on the 25 per cent. VAT rate. In other words, they have lumped petrol with furs, jewellery, washing machines, hi-fi equipment and other items which in their minds are to be discouraged as needless luxuries that should be taxed heavily. I do not believe in discriminatory tax of that kind. I was in favour of the flat-rate VAT because it was not discriminatory. However, that is another argument which we shall be having later.
Whatever may be argued about washing machines, hi-fi equipment, furs, jewellery and the other items contained in the schedule, the key factor about motoring is that, though it is perhaps a luxury to some people, to many others it is an absolute necessity which puts it into quite a different category and makes the Government's somewhat crude attack on motoring costs a matter which should be reconsidered.
Even in the area in which motoring can be regarded as a luxury, when families trip out into the countryside at weekends or visit mothers-in-law, there is a very important point which should not be overlooked. The growth in mass motoring since the war has been one of the great liberating forces in British society. It has been one of the biggest single elements in raising people's standards of living. Car ownership has made possible the enjoyment of all kinds of activities which as recently as 10 years ago were available only to those in the higher income groups.
4.15 p.m.
I am not prepared to use the word "luxury" about this kind of motoring because it has led to improvements in the living standards of people such as I want to see and which I shall try to assist in any way that I can through my political activities. I am sure that the same goes for most right hon. and hon. Members.
The problems created by what the Government are doing to increase motoring costs by this increased vehicle excise duty have severe effects in the more rural areas such as the one which I represent.

In this connection, we are discussing people who have to use their cars. Some of them are older people who will not be able to visit anyone or to do anything unless they have access to their cars. As my hon. Friend the Member for Wellingborough pointed out, and as the hon. Member for Perth and East Perthshire (Mr. Crawford) confirmed, in many parts of the country bus services no longer exist. Often where they still exist, a person can travel to the nearest town on one day of the week but he cannot get back until two days later. Cars are essential to many people living in areas of this kind.
People who live in rural areas but who work in our bigger industrial conurbations have a similar problem. In my constituency, many people live in and around Chelmsford and Braintree and commute to Liverpool Street each day. They have to travel by car to their nearest railway stations. These problems cannot be avoided. They must either cease work, use their cars, or move their homes—which I am sure that the Government would not wish to advocate. These people have to use their cars in order to maintain their existing pattern of life.
Increasingly, it is becoming necessary for families to own two cars. I have gone to live in my constituency, and one of my first actions was to decide that my wife must have a car of her own. We are now a two-car family. It is essential for me to use a car, and I came to the conclusion rapidly that my wife's life would be impossible without a car of her own. It may be that the life of a Member of Parliament is unique because of the odd hours that we work, and so on, but the same is true of many ordinary families where the husband takes the car in the morning and does not return until some time in the evening. Even on housing estates around the larger towns, let alone in the villages, there are fewer shops and amenities. Without a second car, a housewife, especially if she has young children, can be completely stranded because of the absence of public transport.
My hon. Friend the Member for Wellingborough spoke about the problems of shopping. Another important factor is the growing concentration of public services. It is the policy of this administration, as it was to some extent


of the previous administration, to concentrate our hospital services. In my constituency, the smaller local hospitals are being closed and are having their facilities reduced, with the result that many people live eight or 10 miles from the nearest hospital. I am strongly opposed to this, but simply state it as a fact. Visiting anyone in hospital becomes an enormous problem without a car. Local government services are concentrated. There are fewer and fewer local offices, and people have to travel from their villages to the towns if they have any queries about rents or rates.
Doctors are concentrating their surgeries. At the same time, they are encouraging their patients to visit them rather than maintaining the old-fashioned practice of the doctor going on his rounds and visiting his patients. Here again, a car is essential for the ordinary day-to-day things of life like seeing one's doctor. The same is true of postal and other public services. There is a steady trend towards concentration. When this is combined with the growing inadequacy of public transport services, the effects are quite severe.
I have referred already to the problems of commuters. But they face a double blow. The Government, regrettably but rightly—it is a policy forced upon them which I could not honestly oppose in terms of national need—are withdrawing subsidies. This is having drastic effects on the fares of those public transport services which still exist. In my constituency, many bus fares have doubled in recent months. There have been huge increases in commuter rail fares, and there are to be further increases later in the year.
Commuters are facing these problems. In addition there is to be this further increase in the motoring costs which are part of their travel-to-work expenses, and this is causing increasing problems and hardship.
I do not pretend that the increase from £25 to £40 in the annual rate of vehicle excise duty is a disastrous addition which turns it from a problem into a catastrophe. What it is—and this should not be allowed to go without being opposed and without comment being made—is one more burden on top of what is already

a mounting heap of burdens on the people and the areas we are talking about. Over the past few years they have had a huge, disproportionate increase in their rates arising from the revaluation and the damage that did in rural areas, and a disproportionate increase in house prices, which means that people are facing much larger mortgages than they otherwise would. All the costs of living in the kind of area I am talking about have risen, and this is one further burden.
Equally, I do not pretend that if we were to change this particular proposal it would solve these problems, because I do not think there is any neat answer to these problems in terms of a single, simple fiscal device. I think it was the Financial Secretary who argued during the Budget debate that there was a break-even point. If one assumed that the alternative to this increase was an increase in petrol duty, that increase would be 6p a gallon, and using one's car for 7,500 miles a year at 30 miles a gallon one would be worse off with that increase in petrol than with the present increase in vehicle excise duty. That is a fair point, and I would not dispute the hon. Gentleman's figures. In some sense, I accept the implication, but I do not accept that it is the necessary alternative to putting up vehicle excise duty at the present time. There is no automatic necessity for this to go on motoring costs. There are a number of alternatives which should and could have been considered.
I accept that it would not necessarily help the rural areas to load petrol prices. It would depend entirely on how much individuals used their cars. I have no doubt that in the long term the only sensible course in this field is to do exactly that load petrol duty instead of vehicle excise duty. I would move towards scrapping vehicle excise duty and putting the whole load on petrol over a period of time. But with that, positive and definite measures are needed to deal directly with the kinds of problem I have been talking about. I would not like to see that happen without some of the other things which I intend now to touch upon briefly.

Mr. Nicholas Winterton: Is my hon. Friend suggesting to the Committee that the road fund licence should be scrapped for all vehicles, private and


commercial, or purely for domestic vehicles?

Mr. Newton: The amendment relates only to ordinary private cars, and that is certainly the point to which I am addressing my remarks. I am not referring to commercial or agricultural vehicles, and so on, but to private cars.
That is what I should like to move to in the long term, because that makes sense in terms of energy saving, import saving, the development of the car industry, and so on. But with it, as I said during the debates in Committee on the last Finance Bill, there would have to be a new look at the problem of tax relief on travel-to-work expenses. This should be taken much more seriously. It has been dismissed time and again over the years but these have now reached a scale at which this ought to be looked at again. Second, we ought to look at the question of concessionary road fund licences for retired people. In the same way as there has been talk about concessionary TV licences, and we already have concessionary vehicle excise duty for the disabled, we ought now to consider the same kind of approach for retired people.
If we were prepared to have a sensible policy with regard to vehicle excise duty and petrol duty, combined with an attempt to tackle the actual problems of the people as individuals who are suffering especially acute hardship as a result of the increase in motoring costs, I believe that over a period we could begin to make some sense in this field. But, for the moment, by not adopting the proposal which the Government have put forward in this Bill, by accepting the amendment to which I am speaking, we could at least avoid making the problem worse than it is at present.
This has been a fairly lengthy speech because I feel that it is an important problem. I will sum up briefly, if only for the benefit of the Minister who is to reply, the four basic points I have been making.
First of all, I do not think that this proposal is socially just, because it shifts the weight of motoring costs against the smaller car and the less well off. Secondly, it makes no industrial sense and will only make life more difficult for a car industry which is already in trouble. Thirdly, it

makes no sense in terms of energy saving or import saving. Fourthly, and above all, it gives no sign or sense or impression at all of any kind of co-ordinated transport policy, least of all any policy to deal with the problems of hardship caused by rising transport costs and inadequate public transport services in the rural areas.
I do not say that it would necessarily have been right to raise the price of petrol at this time. What I do say is that it is wrong to move in this direction and that it makes no sense at all of any longer-term policies which the Government may have—and that they would do better to reconsider this proposal.

Mr. Nicholas Ridley: I, too, support this amendment. I hope the Committee will forgive me if I have to leave the Chamber shortly, because I have to go to the Committee stage of the Industry Bill where we shall be considering vast sums of money for the British car industry, among others, I think the Government ought to come to terms with the fact that they cannot spend half their time down here hampering the ownership of private cars and the other half upstairs improving the ability of the factories to produce private cars, because the two things do not add up.
I object to the increase in vehicle excise duty on simpler grounds than those put forward by my hon. Friend the Member for Braintree (Mr. Newton). It is simply that I think the discrimination against the private motorist has gone too far. It is no longer logical to regard him as a person of superior means who indulges in a luxurious pursuit. As my hon. Friends have already said, hundreds of thousands of people, millions indeed, depend upon the car for their livelihood and for social and other purposes. Particularly in a constituency such as mine, which is very rural, it is absolutely essential. It shows the stupidity of discriminatory taxation that there is discriminaion always against the private car. That is why I think it is quite wrong continually to increase the tax on motor cars, whether through petrol or through VED.
I am grateful that the Government have accepted what I have said on previous occasions, that they should not put up


the petrol tax, but I am disappointed that they have found a way round it by putting up vehicle excise duty. I should have preferred a much higher rate of VAT across the board. I should be quite prepared to see it go well over the 10 per cent. which it was before the Government foolishiy reduced it, in order to pay for a greater equalisation of the burden of taxes. It is quite unlikely to discourage imports of fuel, and I do not think it is the right way to go about solving our balance of trade problems to seek to discourage imports of fuel. All it does is increase the burdens on one particular section of the community, particularly those living in rural areas. Therefore, I do not believe that this is the right way to look at the whole question of private motoring.
It is extraordinary that the forms of public transport which we have are all tending to lose more and more money. The loss on the railways, the Underground in London, and public transport of all sorts, gets greater every year, yet the Government continue to believe that somehow or other the perfect Socialist era will dawn and everybody can be made to go by public transport, and the car will wither away. Restrictions are placed on parking, there are fines on those who use their cars in big cities, there are very heavy taxes on petrol, there are ever-increasing licence duties. But all these enormous imposts on the private car do not result in diminishing private motoring and the population's taking to the buses and trams and Tubes and trains. The reverse happens. Public transport is used less and less and private transport more and more. As a nation we have to come to terms with the fact that people are determined to have motor cars because they represent the most convenient way of going about their business.
4.30 p.m.
It is wrong to continue to discriminate against the private motorist as if he were a selfish and anti-social person. I would like to see a big reduction in motoring taxation accompanied by taxation spread across the board. If I support the amendment it is not because I want to reduce taxation revenue but because I think that the revenue is being unfairly raised by this means. I know of many constituents who are placed in a serious position

because of the petrol tax and the vehicle excise duty increase. These are mostly people of slender means who have already been hit in other ways by the Government's actions. This is not only a blow against those who motor for pleasure; it is a blow against country dwellers who are not quite so well off as many town dwellers.
It is a pity that the Government introduced this clause. I do not agree that there should be no vehicle excise duty. If the whole of the taxation was placed on petrol it would encourage people to keep a large number of cars which might be used only two or three times a year. That would mean that such people would not be paying their fair share towards the cost of the road system. I do not believe in the abolition of excise duty but I do believe that the burden on the private motorist has become excessive. The time has come to spread the burden among all sorts of groups of people by ceasing to discriminate against the private motorist. For that reason I will support the amendment if my hon. Friends press it to a Division.

Mr. Winterton: I support the amendment. I will direct my comments to one sector of the community which has been harshly hit by the dramatic rise in excise duty. I refer to the elderly, the retired, those living on the State retirement pension in rural areas that are not well served by public transport. We have heard from one or two of my hon. Friends that many such areas are totally bereft of any public transport and that where there is such transport it turns up perhaps once or twice a week. Elderly people need to get out to buy food, to visit their friends and to carry on some sort of existence.
I am sure that the Minister of State does not want people living in such areas to hibernate because they cannot afford to lead a normal existence. As we have heard in the excellent speech of my hon. Friend the Member for Braintree (Mr. Newton), these people have been harshly hit by inflation. Their interest on any private investment has been restricted by successive Governments—if they are fortunate enough to have some private investment. In recent years they have been hit severely by increased rates.
I remind the Minister that it is the country areas which have been most


harshly hit by the dramatic rate rises that have been highlighted in the media and have resulted in militant protests by a section of the community which hitherto has never resorted to this type of public demonstration. Such people have also been affected by the increase in telephone and postal charges. Their whole existence is now in jeopardy. I have had a number of letters from constituents who have said "We shall have to sell our car or lay it up because we can no longer afford to run it." This increase in excise duty is the straw that breaks the camel's back.
The Minister may say that there are few areas where there is no public transport. Perhaps in some of my villages such as Marton, Siddington, Withington, Kettleshulme, Rainow, Wildboarclough and Wincle which have a main road some form of public transport passes through once or twice a week. But I am sure that the hon. Gentleman will be prepared to admit that people often live many miles from main roads. Particularly in the winter, an elderly person does not want to walk four or five miles to a main road, wait for a bus that may or may not arrive and then have to repeat the process at night.
The situation is serious. I regret that my amendment was not called for discussion. The Government have to get more money into the coffers. They have a responsibility to balance the country's accounts although Ministers in the Industry Bill Committee are doing things to upset that in a dramatic fashion. I know that the Minister has some remote villages and homesteads in his constituency. I hope that he will give due attention to the serious problems facing retired and elderly people living on pensions and fixed incomes in remote rural areas who cannot afford to meet extra charges.
I could go on about the problems facing such people in communicating with the outside world. There is the vastly increased cost of renting a television as a result of the Bill. The situation is serious. It is all right for Mr. Scargill to be given a car by his union—and a foreign one at that. No doubt the insurance and the licence are paid for by the union. People living in remote rural areas have to meet their own costs out of a pension which is not keeping pace with inflation.
There are grave problems. Why do the Government not bring in a special road fund licence for retired people? My hon. Friend the Member for Braintree talked about a special rebated television licence for elderly, retired people. Why not have a similar road fund licence for retired persons living in remote rural areas which are inadequately served by public transport? This would help them to lead a normal existence without the anxiety and suffering which they are now experiencing.
The Government claim to represent people and to be concerned about people. How right my hon. Friend was to say that we are talking about people and their everyday problems. Do the Government want this proposal to be the last straw that breaks the camel's back? Does the Minister want to see thousands of people who can no longer afford to live adequately under this Government gathered in the Central Lobby to express their displeasure?
I earnestly ask the Minister of State to give serious consideration to the plight of these people whom it is my privilege to serve. They have served their country for many years. Now that they are retired they cannot demand higher wages. I hope that the Minister will listen well.

Mr. David Mudd: My hon. Friend the Member for Macclesfield (Dr. Winterton) has been relentless in his search for the last tearjerker of an argument. Let me suggest that he has overlooked one argument of logic. If the older members of the community are to lie imprisoned in their cottages in the country, unable to stray forth upon the highways and byways, then similarly the younger members of the community will be so imprisoned. To what will they deploy their energies? The answer is: in one of the few pursuits currently free of excise duty—with the result that the Government will be facing an increased bill for family allowances rather than the cautious, insulting additional £15 a year revenue which they seek to draw from the motoring population.
In a more serious vein, one of the important threads throughout the contributions to this debate so far has been the suggestion that in rural areas it is


quite reasonable and acceptable for workers to wait by the roadside for the rural bus to pick them up. However, what about the man who drives the bus or what about the man who drives the early morning train? By definition, he must be alert and awake to provide that form of transport long before it is available for other members of the public. What will happen to the bus driver who lives in a remote rural area? Is he to sleep at his depôt, or is he, in some way, to be assisted to get to work to provide public transport? Indeed, what will happen to the diesel locomotive driver? Is he to subsidise a public service out of his own pocket, because that would seem to be implied by this proposal in the Bill?
I want to refer specifically to the problems of my own constituency, which are shared by the constituents of my hon. Friend the Member for St. Ives (Mr. Nott). The tin miners, the shipyard workers and the fishermen without exception have lived within the terms of the social contract and have in no way attempted to extort, exploit or extend it to suit their particular needs, yet the economy of Cornwall depends on the tin miners, the shipyard workers and the fishermen. These are the industries that depend upon the most unsocial hours of working—hours that cannot be laid down by the clock and hours that are dependent upon the call of nature.
My hon. Friend the Member for St. Ives will recall that in happier days, when he occupied office, I drew his attention to the case of a gentleman who was a casual harbour-worker in the port of Hayle. Not benefiting from the much-maligned tied cottage, he had to live ten miles from his place of work but he could go to work only when the tide happened to be right. Despite his grandiose schemes, the Secretary of State for Industry may control many things but he will not control the flow of the tides in our ports and he cannot, therefore, seek to control the time at which port employees must go to work.
At that time I suggested that some form of tax allowance must be made available to those people who had no form of public transport and yet who had to get to work at times totally outside those when public transport was

running. The point was fairly made that it was improper for the Treasury to seek to discriminate in favour of this group of people. Yet now, under a Labour administration, we have the situation in which the Treasury is seeking to discriminate against this class of worker. This will certainly not be overlooked or forgotten in Cornwall, where people face these problems.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) made a very interesting case for the reduction of taxation. Clearly, in these troubled, expensive and inflationary times, a reduction in expenditure or taxation cannot be a reality. Therefore, may I conclude by suggesting to the Minister that if, indeed, this is merely a measure to increase revenue and not a discretionary measure against rural dwellers, he can increase his revenue by the simple expedient of introducing a tax rate of 95 per cent. on all those who gain settlements outside the terms of the social contract.

4.45 p.m.

Mr. Hector Monro: I should like to support the vehement protest made by my hon. Friend the Member for Braintree (Mr. Newton) and other of my hon. Friends about this huge increase in vehicle taxation.
Drivers are already hit hard by petrol taxation, and insurance costs are rising, too, due to the inflation that is affecting the repair industry as well as everything else. Now we have the steep rise in the car tax. My hon. Friend has explained how this additional tax could be raised in other ways, for example by a 10 per cent. VAT across the board or, indeed, by adjusting the Government's priorities in their vast expenditure in other spheres.
I want to speak, briefly, of the impact that this increase will have on rural communities. I support what my hon. Friends the Members for Macclesfield (Mr. Winterton) and for St. Ives (Mr. Nott) have said. I want to bring home to the Minister just what it means to those who live five, ten, 15 miles and more away from shopping centres—the great expense involved in going to shop for normal household articles, for recreation and, perhaps, even more important, in getting to and from work.
I do not know whether the Minister appreciates just what it costs to travel


by car ten or 15 miles twice a day, to and from work. This has a dramatic impact when it comes to wage negotiations. I support my hon. Friends in their condemnation of this increase in taxation in relation to those on fixed incomes, pensioners and young people. Young people are entitled to get away from home and the countryside to meet their friends at dances and so on. They are feeling the impact of this high taxation imposed through the motor car licence. This also applies to those families who take their children to and from school each day.
We have all made it clear that frequently there is no alternative. Bus services are sparse and timings singularly inconvenient. Post Office buses are welcome but they are not the answer to the problem. The Scottish bus group has just weighed in with another whopping loss which gives every indication that there will be a further reduction in bus services, making the use of cars all the more important. Yet the Government are bringing in increased taxation. We already know that local authorities are subsidising bus services to the hilt. Rates are increasing more and more and local authorities are becoming reluctant to go any further.
We welcome the indications that there will be concessionary bus fares to pensioners for nearly every area. However, this increase in support by local authorities is bound to become harder and harder, forcing people back to using motor transport which, if it were at a reasonable price, they would much prefer to do. The point that so many hon. Members are making is that the rural dweller must count on private transport to get about. Why is it that the Chancellor is putting this unfair burden on the countryside as opposed to the urban and city dwellers, who have so many facilities at their finger tips? With these few words, I hope that the Minister will accept that he is being most unfair to the countryside. The burden he is placing on it is absolutely penal and in no way helps to raise the standard of life of this country to the level which we are all striving to attain.

Mr. Peter Rees: I should like to refer to the points made with such eloquence by my hon. Friends the Members for Dumfries (Mr. Monro) and for Macclesfield (Mr. Winterton).
I appreciate the Government's need to raise additional revenue to cover their mounting expenditure. We shall have to return to that subject not only in Committee but also, I suspect, in other ways in a matter of months if not weeks. I appreciate the Government's anxiety about and intention to cut the oil deficit and therefore to concentrate, as far as they can, the burden of taxation on motoring. I also appreciate that it must have been a difficult decision whether to raise, once again, the duty on petrol or whether to raise, as they now propose, the duty on the road fund licence. However, wonder—and I shall be listening with keen interest to what the Minister says in reply—whether the Minister appreciates the effect that this will have on country districts.
It would be crude to the point of distortion to say that Conservative Members represent country districts and Labour Members represent urban districts. I know that a small portion of the Minister's constituency is a rural area and, therefore, he may have seen at first hand the change that has come over country life during the past decade or two. I instance, as have my hon. Friends, the diminution to almost vanishing point of the country bus services. Many villages in East Kent are no longer served by a regular bus service. Coupled with that, the village shop in some small villages is almost a thing of the past. Many of my constituents are worried about the difficulties that they are encountering and will encounter, for instance, in obtaining prescriptions. It is no answer to say that the doctor can dispense them. This does not meet the case universally.
Therefore, there are three categories of country resident, if I may so describe them, who will be particularly hard hit. There are those who live in the country and work in towns. Their case has been put very eloquently and movingly by some of my hon. Friends. However, I should like to concentrate on two other categories, the retired and those who work on the land.
Probably both of these categories need to use their cars daily. Some may but many do not. Many may live by their place of work. They leave their wives at home. Possibly their wives do not even


have a driving licence. It happens, therefore, that on Saturdays they will have to drive into the local market town—perhaps Canterbury, Sandwich, Deal or Dover—to take in their wife and do the week's shopping.
Here I would anticipate what we may have to tell the Minister in subsequent debates. Such people do their shopping once a week and want to take it home and put it in a refrigerator or a deep freeze, which are no longer luxuries in country districts but necessities, and these, too, the Minister will hit with his proposals. It follows from that, perhaps, that they may take out their car only on two days a week. Therefore, by these proposals they are being asked to bear, as I conceive it, a quite disproportionate burden—a burden which is hardly felt to the same degree by urban dwellers.
I know that the Minister would not want the country to feel that he and his administration were insensitive to the needs of these people. Therefore, I hope that when he replies to the debate he will show a little imagination and a little flexibility and see whether, even at this late stage, he cannot recast this new tax proposal.

Mr. John Pardoe: It looks as though the Committee will be unduly privileged in this debate by having three Cornish Members taking part. That is entirely proper, because petrol taxes and vehicles taxes affect Cornwall more than any other county. Cornwall has the highest incidence of car ownership of any county. That is not an indication of our wealth and luxurious living but merely that there "ain't no other way" of going about the county.
Our rural transport is more or less nonexistent. It is certainly substantially worse than it was in grandmother's time, and very much worse than it was in great grandmother's time. It is also appropriate that three Cornish Members should take part in the debate, because no doubt Cornwall will have a direct interest in oil and energy shortly when it is discovered in enormous quantities in the Western Approaches—when no doubt we shall come together with Brittany and set up an energy department of our own. Perhaps the hon. Member for St. Ives (Mr. Nott) will be its president.
This is not a proposal to increase the borrowing requirement. I am sure that we shall hear that old chestnut—stewed or roasted. The Government are quite right to want to increase the revenue to meet necessary expenditure. It would be even more right to want to cut expenditure as well. They will, therefore, have to find revenue from some other source. I do not dissent from that proposition at all, and I would support the Government in looking for other sources.
My hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) interestingly ended his speech by making an appeal to the Government to bring in a very severe tax—I think he suggested 95 per cent.—on those who break the social contract. I am delighted to hear that he has been converted to what I and my right hon. and hon. Friends have been advocating for some time. But there is a certain difficulty here. In the debate on the Budget Resolutions and Economic Situation, the hon. Member for St. Ives, who is in the constituency next door, took apart the Liberal proposal to tax increased wages. His remarks are reported at column 1103 of the Official Report for 21st April. I would refer the hon. Member for Falmouth and Camborne—as I do not intend to put forward the reasons why our proposal is impractical; I still think that it is, whatever the hon. Member for St. Ives said—to what was said by his hon. Friend about this matter. He will then know the arguments against our proposal.
There is a serious problem in the rural areas. This problem has been occasioned as a result of the increase in the cost of energy and motoring generally. We have heard in this debate from many hon. Members about the very considerable hardship which people in rural areas are suffering. I do not dissent from that description. I fully support the descriptions that have been put forward. We have very little public transport. What we have will be reduced as a result of the quite correct squeeze on local councils' expenditure. One of the first things that will go will be subsidies to rural transport.
In Cornwall and many other rural areas the car is not a luxury. It is not even a luxury leaving aside its use for getting to work. In large parts of my constituency, and probably in those of other Cornish Members and other rural areas, the car


is the only means of getting to work. We must take account of the very severe disincentive effect which higher and higher motoring costs impose in such areas. It is on this argument that I base my plea to the Government. I am continually confronted with a situation in which if one takes into account the motoring costs of getting to work, one finds that for many constituents it would clearly be more advantageous economically to stay at home. That is not simply because Cornwall is a very low-wage area. It is partly because of that but also partly because people have to drive very considerable distances to get to work. Work is scarce. Jobs are few and far between. Everyone has to have a car to reach their work because no public transport is available.
Having said that, and having urged the Government to consider the point about the incentive as the most important point in the argument—although, I accept all that has been said about hardship—I come to a further matter. Such is the way in which we run our welfare services and our unemployment benefits—although I do not necessarily argue against that—that in 1974 we reached a situation in which a married man with two children with an income of less than £55·50 a week—leaving aside the costs of motoring now, and anywhere in the country—was better off staying at home than he was going to work. But £55·50 was very much above average earnings in 1974. Therefore, we are not talking merely about people in Cornwall or those right at the bottom of the pay scale. We are talking about a vast area of the population. If one adds to that the marginal costs of getting to work, one can appreciate that the disincentive effect is very great indeed.
Nevertheless, I accept that the Government are having a careful look at this matter. I have had a letter from the Financial Secretary to the Treasury, dated 10th March, in which he said,
We are urgently exploring a number of ways in which help might be given and I hope these investigations will result in specific proposals to meet the very real difficulties.
That was in answer to a letter of mine about the problems of transport in rural areas. I hope that we shall hear something from the Minister of State today along those lines, or at least, I hope that he will be able to indicate when we shall

be hearing the results of the Government's thought processes.
My second point, on which I am entirely in agreement with the Government, concerns the question of energy conservation. I accept that almost inevitably this must be achieved by price, because the only other way of doing it would probably involve us in a great deal of bureaucracy or rationing, and it is very difficult to think of any better way of doing it. I have no love of bureaucracy or rationing. I accept, too, that although petrol is a small part of the total, nevertheless it is worth having a go at it. I again quote from the Financial Secretary's letter of 10th March. He said,
Our imports of petrol and of crude oil for refining into petrol cost us about £500 million a year, and it is believed that about 60 per cent. of petrol is purchased by the private motorist.
I accept the energy conservation point. However, in the debate on the Budget Resolutions my right hon. Friend the Leader of the Liberal Party challenged the Chancellor on our tentative proposal—it was only tentative—that there should be at least a two-tier VED and that there should be one rate for a Mini and another for a Rolls-Royce. On that occasion, the Chancellor said that the output figures were there for all to see. He said:
It might make sense to make a change along the lines suggested in a year or two, but not at a time when we know the British car industry is incapable of meeting the demand for small cars which would result"—[Official Report, 21st April 1975; Vol. 890, c. 1114.]
I wrote to the Chancellor immediately after that debate, challenging him to produce the output figures on which he based that assertion. I am grateful for the reply that he sent me, although he did not give me the figures I requested. Instead, he gave me a wider generalised view of the situation. I accept, to a certain extent, that the British car industry is in such a sorry state and is so under-invested in production of the cars which we seem to need in this situation that it is in no shape to compete.
5.0 p.m.
The right hon. Gentleman said in his letter to me of 15th May:
even in the range from one litre to, say, 1300 c.c. there are some attractive new models


recently introduced by, for example, Volkewagen and Peugeot, which would compete very strongly with the Viva and the Escort.
I accept, therefore, that the Government have a point on the question of car production in Britain at the moment, but I think we should delve behind the Chancellor's figures and consider why this situation has arisen and whether the structure of our taxation has not encouraged that situation.
I do not say that there is a definite answer one way or the other, but the available evidence seems to indicate that the differential car tax in France has had one very salutary effect on the French motor industry, namely that it has encouraged the manufacturers there to maximise the efficiency of their engines up to the limit. It may well be for that reason that the most recent survey by the AA, published in "Drive" magazine shows that, of all motor cars, Renaults are by far the most economical more economical than our cars in every range and more economical than other European cars. For instance, Renaults in general cost about 3·5p per mile to run whereas the Mini costs about 3·81p per mile. I will not go into detail on those figures because any hon. Member who is interested can study them in "Drive".
It seems therefore that there may well be an argument, even at this stage, when the British motor industry cannot entirely cope and compete, for introducing a two-tier tax. It might well encourage our motor manufacturers to do what the French have done, to maximise the efficiency of their engines.

Mr. A. J. Beith: Does my hon. Friend not agree that unless the Chancellor indicates some intention of moving in this direction, even if he does not do so this year, none of the developments that my hon. Friend is seeking is likely to take place, and the British motor industry is likely to continue along the lines he has criticised?

Mr. Pardoe: I am grateful to my hon. Friend for summarising so well the point I was endeavouring to make. He has outlined the reason for the Government reconsidering their attitude to the two-tier structure, even though they may be right to resist the idea on the basis of current production figures.
If they intended to think again, they should take account of rather more than simple engine capacity. That is, perhaps, too simple a basis. They should take account of the weight of a car, because basically lighter cars require less energy to produce and use less energy in running. They should certainly take account of vehicles which consume more petrol and which have higher servicing costs. Any type of car which reduces the total use of energy should be favourably considered. I understand that a hybrid car is coming on to the market, based on the Imp, which does about 130 miles per gallon.
There is a strong case for a standard Government test to show the energy consumed in constructing a car, the energy required to run it and the energy required to service it. It may be proved that the Mini is not a very good bet, but we should have to accept that fact and the new nationalised BLMC would have to do something about it.
There are other solutions which the Government should consider. There is the suggestion of a special road fund licence for the retired. I know the splendid headlines that my support for that suggestion would secure in my local newspapers, but I dissent from that suggestion because once started there would be no end to the process. It would be far better to provide old-age pensioners and elderly people with the money necessary to maintain a certain standard of living, leaving them to choose how they spent it. That would be preferable to subsidising cinema seats, car seats, walking sticks or whatever.

Mr. Newton: What does the hon. Member think of the existing concessionary fares schemes? Does he carry the logic of his argument so far as to want to scrap them?

Mr. Pardoe: For a very long time concessionary fares schemes were operated only in those places where the local authorities owned the bus service. After the Transport Act 1968 it was open to local authorities to make an arrangement with the bus companies to give concessionary fares. I undertook a detailed exercise with the local bus company and my local authority and worked out a scheme, but the authority would not pay


for it. I think that the hon. Member for Braintree will find that these schemes involve great unfairness. Those authorities which are poor and which are up against heavy rates resistance are unable to subsidise such a scheme, whereas, perhaps, other authorities, which can afford to do so, but in whose area a scheme is less necessary, will operate concessionary fares. If there is to be such a scheme, it should be operated nationally. Even with concessionary fares, it is far better to increase the pension and let the pensioners choose how they want to spend the money.
Another possibility is to have a special licence for rural areas. The idea is possible, but the Government may think it too bureaucratic, and it would be for them to say how they could cope with it. It is possible to have a special price for petrol in rural areas. I moved an amendment in Committee on the last Finance Bill to that effect. I am not now particularly endeared to the idea. The hon. Member for Cirencester and Tewkeslnry (Mr. Ridley) pointed out the error of my ways, and I am grateful to him for that. On the whole, he persuaded me more than I persuaded myself. Hon. Members cannot say I am not honest.
A further possibility is some kind of get-to-work grant. That would be less bureaucratic than the other suggestions I have made, and it might be done within the context of the regional employment premium so that a tax-free allowance could be given to people who travelled more than 15 miles, or whatever, to work.
Of course, one might ask why subsidise rural areas at all. I do not like subsidising, but London is heavily subsidised. I believe that £53 million is being paid to London Transport and that substantially more goes to British Rail to subsidise the commuter rail service. London needs such subsidies a lot less than Cornwall.
Finally, the Government could consider an across-the-board tax concession to help pay for getting to work, as is done in Germany. The Inland Revenue will say that this is impossible to do, but it is done in West Germany, and it seems to me the best answer to the problem.

[SIR MYER GALPERN in the Chair.]

Mr. Ian Lloyd: The hon. Member for Cornwall, North

(Mr. Pardoe) is for me so often the living embodiment of the curate's egg. I find myself agreeing in parts with what he has to say, and sometimes agreeing to a great extent. I do so on this occasion, and principally with his comments about the possibility of discriminatory allocations of the burden as between pensioners and the rest of the community.

Mr. Ridley: My hon. Friend is being less than fair to the hon. Member for Cornwall, North (Mr. Pardoe). At least the hon. Gentleman is able to persuade part of his own party to listen to him.

Mr. Lloyd: I do not accept that qualification as regards myself.
I have two or three important points to make which arise from the debate. The essence of the problem has been intelligently discussed between those who advocate, in a sense, support for the Government's measure of increasing the vehicle excise tax and those who suggest that a similar amount of taxation might have been raised more sensibly, and with a greater respect for the various methods of taxation, by increasing the tax on petrol.
Within the discussion that has taken place I have detected a certain lack of attention for something which I believe more fundamental and more important. There is an important relationship of growing significance between the standard of living and the cost of energy. I do not think that it is now possible for great countries or for large communities, and certainly large communities within modern industrialised countries which are heavily energy dependent on petroleum fuels, to refuse to make basic adjustments in their economic relationships when there is a basic adjustment in the relationship between the cost of energy and the standard of living. There is no magic wand which a Conservative Government, a Labour Government or a Liberal Government can take out of their knapsack and wave to exempt the community as a whole from the unfortunate consequences.
Adjustments must be made and they must be accepted. The United Kingdom as a whole, if it is facing an increase in the real cost of petroleum fuels, must in some way distribute the increase in that real cost over the whole of the community. If there are no alternative resources, that must mean that the real


standard of living of the community must fall. There is no escape from that conclusion.
If some significant sectors of the community are exempted by fiscal or other processes—I do not dispute that exemption is possible, and it may be desirable—to what extent must the remaining sectors of society accept a greatly increased burden? This is the point that we do not want to make. This is the point which we are inclined to ignore and to shuffle under the benches on either side of the Committee. We must ask the questions "Which sections, how much and what are the consequences?" Those are very much more difficult questions to answer.
The load that can be carried by the productive sections of the community is not unlimited. There is the assumption underlying so many desirable shifts in the burden, such as pensioners having subsidised petrol or subsidised television and other sections of the community living in rural areas having subsidised petrol, that subsidies can be given without any significant or serious economic consequences for the rest of the community. That I dispute absolutely and profoundly. If we allow ourselves to make that assumption we are likely to find that there are serious consequences.
5.15 p.m.
We live in a mass consumption society. All this talk about large motor cars shows what a long way we have gone. We can no longer finance the fiscal burdens of the British community by taxing the man who owns a Rolls-Royce. That situation disappeared about 50 years ago, but it is a concept which still tends to underly much of our present fiscal thinking. If the nation has to face mass adjustment and significant adjustment in its economic relationships as a result of such things as the massive increase in the price of petrol communities as large as the pensioners—I remind the House that the pensioners number 9 million and that the motoring population represents 19 million vehicles—cannot by any process of the imagination, or by fiscal sleight of hand, be exempted from the necessity of accepting and making the necessary adjustments in their relationships which fundamental cost changes require.

Mr. John Nott: I think that the Committee will agree that this has not

been a particularly exciting debate. Nevertheless, it has covered a subject of great importance to many people, and especially to those living in rural areas. I believe that my hon. Friends the Members for Wellingborough (Mr. Fry) and Braintree (Mr. Newton) made a most powerful case. It seems worth recording, at the outset that it is only two months ago that we were debating the last major increase imposed on the private motorist by this Government—namely, the massive increase in the VAT rate on petrol which took it up to 25 per cent. Today we are debating the 60 per cent. increase on vehicle excise duty from £25 to £40 a year.
As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has said, we feel that the discrimination against the private motorist—many private motorists are essential users of their motor cars—has gone too far. Of course, we associate all Labour Governments with high taxation coupled with profligate expenditure by themselves. However, the combination of the higher cost of imported oil, which is certainly not the fault of the Government, plus the greatly increased taxation has undoubtedly caused an increasing degree of concern, bordering on desperation, in many parts of the country.
My hon. Friend the Member for Macclesfield (Mr. Winterton) listed many of the villages in his constituency. Some of them have admirable names. All Members who represent rural constituencies could compete with my hon. Friend's list by giving most of the polling stations in their constituencies. My hon. Friend made the important and serious point that it is particularly the elderly in the villages who are suffering from the increase in petrol costs and who will now suffer even more by the increase in the vehicle excise duty. That point was also made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees).
My hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) told us something about the youth in his constituency. He referred to the only youthful pursuit which he said is still untaxed in West Cornwall. It is untaxed everywhere. I am glad to say that it is untaxed even in London. I can bear witness, if not personal witness, to my hon. Friend's


testimony about West Cornwall. As my hon. Friend knows, the ancient borough of Helston, which is a very ancient borough indeed, borders our constituencies, although the actual town is in my constituency. For several years it had the highest birth rate in the United Kingdom, it still comes very near the top of the list. That is not wholly to do with the expense of evening travelling in West Cornwall; it is also something to do with the presence of the Royal Navy air station at Culdrose just outside the boundaries of the borough. It may also be the Cornish cream which keeps us all going. Treasury Ministers should remember that if young people cannot travel to local events such as darts matches and dances in the evenings there will be a heavy future impact on family allowances.
My hon. Friend the Member for Falmouth and Camborne made the serious point that the people working in this area of high unemployment have been keeping to the social contract and have settled for reasonable amounts in their negotiations with their employers. Those are the very people in the rural areas who will be particularly hard hit by this increase.
The hon. Member for Cornwall, North (Mr. Pardoe) said that Cornwall has one of the highest car-owning populations in the country, which is true. The statistics on incomes are extremely poor and hardly exist, but the figures produced by the Inland Revenue show that Cornwall also has possibly the lowest income per head of any county in the United Kingdom. So Cornwall has a high car-owning population and is an extremely low income area.
As the hon. Member for Cornwall, North said, this shows that a car is an absolute essential for people to get to work because there are virtually no bus services and no train services. Most of my constituents living in the Land's End area and the Lizard and people living in North Cornwall have to have a car—they have no choice. My hon. Friend the Member for Falmouth and Camborne also made the valid point that in this low income area the increased burden upon people for whom a motor car is essential is such that there is a diminishing incentive for them to go to work. That is a worrying and serious development.

Mr. Crawford: The hon. Gentleman said that Cornwall was the lowest income area in the United Kingdom. Would he care to rephrase his remark? It is perhaps the lowest income area in England.

Mr. Nott: I am slightly tempted to be diverted. I took the Inland Revenue statistics which break down the employment incomes in England and Scotland into counties. There are one or two Highland counties in Scotland which have a lower employment income than does Cornwall. To be strictly accurate, I will accept the hon. Gentleman's correction.

Mr. Pardoe: Perhaps the best figures are those published for manual workers aged 21 and over giving average weekly earnings. Of the 63 sub-divisions according to the Department of Employment the western area of Cornwall, in which lie his constituency and the southern part of mine, shows the lowest figures apart from Roxburgh, Selkirk and Peebles.

Mr. Nott: I am grateful for the hon. Gentleman's support, particularly when it gives me assistance against the Scottish National Party.
My hon. Friend the Member for Cirencester and Tewkesbury spared a few moments from his labours upstairs on the Industry Bill to point out to the Committee that the Government are busy taxing the motor car downstairs and pouring money into the motor industry and other industries upstairs. He did not think that this was very logical, and I agree.
My hon. Friend the Member for Braintree made some general remarks about the motor car industry, and it is worth referring briefly to the history of purchase tax and VAT. In 1962 purchase tax on motor vehicles was 25 per cent. By the time the previous Labour Government left office it had risen to 36⅔ per cent. During the Conservative Government's period of office it was brought down to 20 per cent.
I wish now to make clear the attitude of the official Opposition on the general principle. We are appalled at the escalation of public spending. Almost every day the Government come forward with new measures which make the Chancellor's forecast last month of a £9 billion borrowing requirement seem like a piece


of ancient history. Because the Government are unable to control their own spending, with the serious effect that has upon inflation, we do not accept that Treasury Ministers are entitled to expect our support for more and more taxation upon some of the most vulnerable sections of the community.
The answer to the Government's dilemma does not lie in heavier and heavier taxation but in less profligate spending by themselves. We reject the argument that each and every positive proposal that the Opposition put forward to help and protect the most vulnerable sections of the community is unacceptable to the Government because it increases their borrowing requirement. If that argument were accepted by the House generally there would be virtually no sanction upon the degree to which the Government felt themselves to be entitled to impose ever-increasing taxation upon the British people.
When inflation is running at a very high level, we accept in principle that the Chancellor will need to raise excise duties at certain times to maintain his revenue. The excise duty on vehicles has not been raised since 1968, but I suggest that no Chancellor should raise excise duties without studying carefully all the associated increases in costs which affect the particular sector of the economy on which he is attempting to levy additional tax. The increased taxes on essential motoring within the past 12 months have been exceptional.
In case there is doubt about the official Opposition's attitude, I make clear that we would have preferred the rate of VAT to be held at 10 per cent. rather than reduced to 8 per cent. with a higher rate of 25 per cent. By our calculations, had the Chancellor retained the 10 per cent. rate of VAT it would have provided more than sufficient revenue to keep the vehicle excise duty at £25 a year.
Since the Government came to office the total tax on petrol has risen from 22½p per gallon to 37p per gallon—an increase of 65 per cent. It now represents more than half the retail price of petrol. By this clause the vehicle excise duty is raised at one jump by 60 per cent. Each of those increases is more than double the rate of inflation during the

same period. According to the calculations of the Automobile Association it now costs £19 a week to keep a car on the road against £11 a week in 1973. That is an increase of 72 per cent. during the past two or three years. I found that figure difficult to believe. It seemed so high that I tried to check it for myself. The only way I could do so was with the aid of the Family Expenditure Survey but that is out of date because it refers only to 1973 incomes. The 1973 figures show that the average expenditure of someone earning roughly the national average weekly wage was about £4·30 per week. That figure, worked through to actual car owners as opposed to the average, is not so different from the £11 a week produced by the Automobile Association.
When the Chancellor has information put in front of him before a Budget on the effect of measures of this sort he has to have regard to the fact that the public Expenditure Survey is an extremely blunt instrument. It gives an average figure and takes no account of the devastating effects which measures of this sort have upon those who actually own cars.
I ask the Government to understand what this means in rural areas. Many of my hon. Friends have given examples. I could give hundreds of examples from my constituency file but I will mention just two. One letter, which is dated 15th January says:
I am employed by the Western National Omnibus Company at their depot in Penzance.
That is the nationalised bus undertaking in the West country.
When on early or late shift I have to use my car to and from work as there are no public transport vehicles so early or so late. With my basic pay of £23 per week less tax, insurance and so on, and a further average of £4 for petrol per week, I find that I would be just as well off by being on the dole.
That point was made by the hon. Member for Cornwall, North.
The letter was from a typical member of my constituency taking home £23 per week. According to the AA figures, in which vehicle depreciation is taken into account, it costs approaching £20 a week to keep a car on the road.
5.30 p.m.
I take another example. This note concerns seven scattered families living


one side of a little village near Lands End called New Mill. I refer to the case of a Miss S. and her neighbour. The note reads:
There is only one small bus which runs from Zeunor to Penzance once a week on Thursday. It is therefore usually very overcrowded.… As there are virtually no shops in the area I have to come in and do my shopping taking this once a week bus service. A Mr. Z. a grocer, does come out with groceries, if I telephone him, but he can come out only once a week. The vicar used to help bring in the papers from St. Ives but he has been ill for some time and is not likely to be able to help with them again.
So, no papers. She continues,
The butcher used to call twice a week but he has just informed the residents that he will not be calling after the end of this month.
So, no butcher either.
I do not want to elaborate on this. All hon. Members representing rural constituencies can give such examples. This is a worrying aspect of life in rural areas. I shall not fatigue the Committee with more examples, but they are numerous.
I shall pass over the point made by my hon. Friend the Member for Braintree and others about energy saving. We debated that matter on 3rd March. The Paymaster-General said that the results from energy saving with the additional increases in taxation are very slight. The Government accepted that point. We recognise that the Government must raise their revenue but in our view it should have been raised in other ways. Since the energy saving is very slight we feel that the Government should reconsider this increase once again.
I now summarise the arguments which have been advanced. In this I echo the words of my hon. Friend the Member for Braintree and my hon. Friend the Member for Wellingborough by saying that the Opposition oppose the increase, first because of its size. This is a sudden jump of 60 per cent. coming after a roughly similar jump in the tax on petrol within the past year. Secondly, we object to it because of its discriminatory nature and the way in which it bears extremely hardly on people in rural communities, who normally have low incomes, and who, since they are working people, are essential users. Thirdly, we object because of the hardship which it will cause to the elderly.
Last, we object because of its marginal effect on energy saving. I have raised this

matter over many months with the Government. In my file I have a host of letters from Ministers in the Department of Energy indicating that something is being done and that the matter is under consideration, and that the Government will be coming forward with proposals. But nothing has happened. Between the time we were assured that the Government were conscious of the problems, which were described in the debate, and the making of an announcement as to how the Government intended to tackle this problem, the Chancellor came along with yet another impost. I refer to the 60 per cent. increase in vehicle excise duty. We must be led to believe that the Government do not understand the problems which we are discussing in spite of the letters I have received from Ministers in the Department of the Environment and the Department of Energy.
On the assumption that the Government are unable to accept the principle underlying this amendment, I therefore ask my right hon. and hon. Friends to support the amendment in the Division Lobby when the Minister of State has concluded his remarks.

The Minister of State, Treasury (Mr. Robert Sheldon): This has been an amiable interlude in our debates because to me one of the main interests has been that of Cornishmen swapping their tales, and hearing about their splendid villages, which I know very well from holidays, and which I shall know again within the next week or so. I could not help anticipating with pleasure the little time that I shall take off from the House.
The hon. Member for St. Ives (Mr. Nott) made a number of points with which I hope to deal in my remarks.
First, I should like to comment on the Amendment No. 4, which was moved by the hon. Member for Wellingborough (Mr. Fry). The purpose of this is to leave the rates of vehicle excise duty on cars at their pre-Budget level. If we were to accept the amendment, the cost to the revenue would be £209 million in a full year. Bearing in mind that the excise duty on cars comes to about three-quarters of the total yield, the cost this year would be £190 million.
Considerable interest was shown as to the effect of this increase on rural areas.


The hon. Member for Macclesfield (Mr. Winterton) started off with a long and moderate speech on these matters. He was followed by the hon. Member for Braintree (Mr. Newton). Although the impact on rural areas is bound to be considerable, some hon. Members made the case for the rural areas on the grounds that those people had a great deal of mileage to cover overall or that their cars were used for extensive journeys, while others held that cars were of great necessity in rural areas.
As regards the extensive car users and the increase in the vehicle excise duty, a car giving 30 miles per gallon—which is not an unreasonable estimate—would have to do less than 7,500 miles a year to compensate for the increased petrol duty, which was the other alternative offered by many hon. Members. The petrol price has risen considerably. If we were further to add to that considerable increase the total would be too high. The hon. Member for St. Ives said that the tax now represents over half the price of petrol. He was right to say that. But before September 1973 it amounted to more than 60 per cent. of the price. I accept that the price of petrol has increased and that the tax has increasd, but, expressed as a proportion, the tax has not increased as much as is generally believed. It is important that there should be a balance between the amount that will be raised from those who use their cars moderately and from those who do a considerable mileage.
In the years up to 1948 there was always a differential vehicle excise duty. That was changed from 1948 to the single rate of vehicle excise duty to which we have become accustomed. Therefore, from 1st January 1910 right up to the end of 1947 there was this differential duty which bore heavily on the constraints of design which were a particular feature of the pre-war British motor car industry, despite the arguments adduced by the hon. Member for Cornwall, North (Mr. Pardoe), I do not think that anyone would wish to see those constraints again. They distorted the motor industry and prevented its considerable expansion—perhaps world-wide expansion—to become the greatest industry in the world. It might have been possible in pre-war years but a design radically different from that re-

quired for export had to be produced for the home market. The lesson was learned, and the situation was corrected, but, in my view, it was corrected too late.
The main pressure on economy of use in motor car design will come from those individuals running cars who look for low levels of petrol consumption. Anything that hon. Members here or people outside can say that will bring to light the comparative use of petrol in various cars will help in this direction.

Dr. Alan Glyn: I have been following the hon. Gentleman's argument with great care. I think that his analysis is correct on the question of how many miles a person does in a year and whether the tax on petrol or the revenue tax hits him more. Does the hon. Gentleman agree that under the present arrangements the persons who are badly hit are those who do small mileages, the sick and the old, and those who live in rural areas and are obliged to have cars, because their overheads are very heavy?

Mr. Sheldon: I agree with the hon. Gentleman. I doubt whether that is peculiar to rural areas, but the problem can be exacerbated. Indeed, in my constituency some people have great difficulty in going half a mile to shopping areas. That presents problems to them. I shall be dealing with some of these matters in greater detail.
I am concerned about the point made by the hon. Member for Macclesfield and others regarding the necessity of distinguishing and differentiating between classes of users. I am sure that the hon. Member for Windsor and Maidenhead (Dr. Glyn) also had that point in mind. The difficulty arises on both differentiation and definition.
I will deal first with the definition problems. If we were to consider the areas not served by public transport, we would have an immense task, because public transport is absent not only from rural areas, but from many other parts of the country. The deficiencies of public transport are known by many hon. Members who press the various authorities concerned about the problem.
Some people need cars for reasons of health and family circumstances, apart from distances to shops. Their purposes


are no less valid than others which have been mentioned today. If we were to try to cover the problems of definition and differentiation, we would be faced with an administrative problem incapable of being solved.
The difficulty of operation of any form of differentiation is that the vehicle excise duty is provided for the keeper, not the owner, of the vehicle. That is the important aspect. Being provided for the keeper, not the owner, there would be the easy and ready possibility of the transfer of vehicles. It would be difficult to prevent abuse of that kind taking place.
I accept that in practice it is impossible to legislate for the wide variety of circumstances defining how far from public transport one would have to be. It would end with the natural and, in these circumstances, justifiable grievance that those requiring to shop in towns, perhaps living not in a rural area, but in an area where there were no shops on their doorsteps, would find themselves disadvantaged by not being able to benefit from this concession.
5.45 p.m.
Up to the year 1968 the vehicle excise duty was an integral part of the revenue derived from the motor car industry. At that time the vehicle excise duty stood at £25. Since then prices have risen by 80 per cent. By comparison the vehicle excise duty has increased by 60 per cent. We estimate that this rise of £15 a year will increase the costs of motoring by 2 or 3 per cent. only.
When we consider the present economic situation and the need, quite justifiably, to reduce the public sector borrowing requirement—I take on board the point made by the hon. Member for St. Ives—it is only right that the motor car should play its part in the raising of these sums of money.
The hon. Member for St. Ives gave us his principle in attacking Government taxation policy. He said that were the Labour Government to attack the most vulnerable sections of the community, he would have no hesitation in pronouncing against them for trying to raise taxes rather than cutting public expenditure. He based this theory on the basis that we were attacking the most vulnerable sections of the community. But surely he must realise that if we were to cut

public expenditure in the unspecified ways that he did not mention, we would be forced into attacking the most vulnerable sections of the community because so much spending is directed in that way. I have heard many of his hon. Friends attack subsidies and various kinds of transfer payments which they maintain are the easiest forms of public expenditure to cut. But these concern the most vulnerable sections of the community.

Mr. Nott: There does not seem to be much principle involved since the Government are to phase out the milk subsidy next year. The Minister of State admitted in a debate a few weeks ago that the milk subsidy could go now. Since there is no principle in keeping the milk subsidy, the Government are taking it away. Could that not go now?

Mr. Sheldon: I am surprised to hear that the hon. Gentleman objects to the milk subsidy going in the way that the Chancellor suggested.

Mr. Nott: I am in favour of that.

Mr. Sheldon: Then there is agreement on both sides and it is a point hardly worth raising. I should have thought that the milk subsidy being phased out would delight the hon. Gentleman. But if he wants to go beyond that, obviously there would be an attack on certain vulnerable sections of the community. What we are doing about the vehicle excise duty needs to be considered alongside that point.
The point made by the hon. Member for Braintree related to the examination that he conducted on a variable tax for the vehicle excise duty. The hon. Gentleman considered the abolition of the vehicle excise duty and its replacement by a rise in the price of petrol. I should point out that if this were to happen, the price of petrol would rise by 16p.
To increase the price of petrol through taxation instead of the vehicle excise duty would not be suitable in the present economic situation. It would be too great a reliance on one particular tax. At a time of economic stringency there is a need to obtain revenue from as wide a number of sources as possible in order to share the burden of taxation as fairly as we can.
There is the question of the taxation of car ownership as opposed to the taxation of car use. There are many people who believe that there is an important rôle for both of these taxes—to tax not only use, through the petrol duties, but also car ownership.

Mr. Keith Speed: Will the Minister confirm that abolition of vehicle excise duty would save 6,000 to 7,000 civil servants and £15 million to £16 million a year in administrative costs?

Mr. Sheldon: The hon. Gentleman has overlooked an important factor. If we were to remove the vehicle excise duty we would still require some facility for the registration of cars, which would involve considerable administration. If we took that action we would not greatly diminish the number of civil servants required for the operation of vehicle excise duty, because a considerable number would still be required for the registration of cars. [Interruption.] If we have a debate on the Question, "That the Clause stand part of the Bill", I shall be happy to go into this whole issue.

Mr. Mudd: Have the Government studied the system in Denmark whereby when a new car is registered for the first time there is a registration fee once and for all of 110 per cent. on the price of the vehicle? This would obviate the cost of annual relicensing, and the administration requirements.

Mr. Sheldon: I am not sure whether figures of that size are designed to bring comfort to the Opposition. They do not bring much comfort to me. Irrespective of what the hon. Gentleman has said, he has underestimated the number of people who would be involved in a registration facility of the type that he has outlined.
Given the big increase in the tax on petrol that would be needed to produce the same revenue, those who live in rural areas would find themselves faced with substantial increases in charges.
Perhaps the clinching argument concerns the British motor car industry. Although the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) made great play with the fact that the problem of the motor car industry was being looked at

upstairs and the problem of taxation downstairs, there is a point where they meet. If we had introduced a variable vehicle excise duty to favour the small car it would have taken years to provide the means to produce the new cars, with the tooling and so on. Any change of this kind, made purely for taxation considerations, would be absurd in the context of the changes that would be required in the motor car industry.
It is also the case that the British motor car industry is not especially strong at present in the production of small cars, particularly cars of less than 1,000 cc.

Mr. Winterton: Does the hon. Gentleman agree that one of the few car companies making a profit is Rolls-Royce, and that a two-level tax which would discriminate against the larger car might well upset market forces which allow this company—a very trouble-free company—to make a handsome profit for this country?

Mr. Sheldon: I understand the point made by the hon. Gentleman, but the most important factor is that fundamental changes in taxation with repercussions on manufacturing and production need to be introduced with great care and co-ordination.
In the present circumstances, arguments about the economy are sufficient to add to the arguments that I have used so far. If the vehicle excise duty were replaced by a tax on petrol there would be a certain overlap, because the vehicle excise duty is payable in advance, whereas the excise duties on petrol are payable as petrol is purchased. That would result in a net loss to the Revenue of about £200 million which, for this year, with the particular difficulties that we face, rules out this solution.
As my right hon. Friend the Chancellor said, when we are considering the problems of industry, and how taxation affects industry, we are always open to consultations, and consultations will take place.
The important aspect of this debate is that the present defects of the vehicle excise duty have been exaggerated. I believe that the increased duty has a contribution to make to the Revenue, and I ask the Committee to reject the amendment.

Question put, That The amendment be made:—

The Committee divided: Ayes 152, Noes 186.

Division No. 208.]
AYES
[5.57 p.m.


Adley, Robert
Hannam, John
Pardoe, John


Arnold, Tom
Harrison, Col. Sir Harwood (Eye)
Parkinson, Cecil


Atkins, Rt. Hon. H. (Spelthorne)
Harvie Anderson, Rt. Hon. Miss
Penhaligon, David


Awdry, Daniel
Hastings, Stephen
Percival, Ian


Bain, Mrs. Margaret
Havers, Sir Michael
Raison, Timothy


Baker, Kenneth
Hayhoe, Barney
Rathbone, Tim


Banks, Robert
Henderson, Douglas
Rees-Davies, W. R.


Beith, A. J.
Heseltine, Michael
Renton, Rt. Hon. Sir D. (Hunts)


Berry, Hon. Anthony
Hicks, Robert
Renton, Tim (Mid-Sussex)


Biffen, John
Higgins, Terence L.
Ridley, Hon. Nicholas


Biggs-Davison, John
Hordern, Peter
Roberts, Wyn (Conway)


Blaker, Peter
Howe, Rt. Hon. Sir Geoffrey
Rossi, Hugh (Hornsey)


Boscawen, Hon. Robert
Howell, David (Guildford)
Sainsbury, Tim


Bowden, A. (Brighton, Kemptown)
Hunt, John
Shaw, Giles (Pudsey)


Boyson, Dr. Rhodes (Brent)
Irvine, Bryant Godman (Rye)
Shaw, Michael (Scarborough)


Brittan, Leon
James, David
Shelton, William (Streatham)


Brotherton, Michael
Jenkin, Rt. Hon. P. (Wanst'd &amp; W'df'd)
Shepherd, Colin


Brown, Sir Edward (Bath)
Jessel, Toby
Silvester, Fred


Bryan, Sir Paul
Kilfedder, James
Sims, Roger


Buck, Antony
King, Tom (Bridgwater)
Sinclair, Sir George


Budgen, Nick
Knox, David
Smith, Dudley (Warwick)


Butler, Adam (Bosworth)
Latham, Michael (Melton)
Speed, Keith


Carlisle, Mark
Lawrence, Ivan
Spicer, Jim (W Dorset)


Chalker, Mrs. Lynda
Lawson, Nigel
Stanbrook, Ivor


Churchill, W. S.
Lloyd, Ian
Stanley, John


Clark, William (Croydon S.)
MacCormick, Iain
Stewart, Donald (Western Isles)


Clarke, Kenneth (Rushcliffe)
Macfarlane, Neil
Stewart, Ian (Hitchin)


Clegg, Walter
MacGregor, John
Stradling Thomas, J.


Cockcroft, John
Marshall, Michael (Arundel)
Tebbit, Norman


Cope, John
Marten, Neil
Temple-Morris, Peter


Costain, A. P.
Mather, Carol
Thomas, Rt. Hon. P. (Hendon S.)


Crawford, Douglas
Maude, Angus
Thompson, George


Crowder, F. P.
Maudling, Rt. Hon. Reginald
Thorpe, Rt. Hon. Jeremy (N Devon)


Dean, Paul (N Somerset)
Maxwell-Hyslop, Robin
Townsend, Cyril D.


Drayson, Burnaby
Mayhew, Patrick
Tugendhat, Christopher


Eden, Rt. Hon. Sir John
Miller, Hal (Bromsgrove)
Vaughan, Dr. Gerard


Evans, Gwynfor (Carmarthen)
Mitchell, David (Basingstoke)
Wainwright, Richard (Colne V.)


Fisher, Sir Nigel
Moate, Roger
Wakeham, John


Fookes, Miss Janet
Monro, Hector
Walker-Smith, Rt. Hon. Sir Derek


Fowler, Norman (Sutton C'f'd)
Moore, John (Croydon C.)
Wall, Patrick


Fox, Marcus
Morgan, Geraint
Warren, Kenneth


Freud, Clement
Morrison, Charles (Devizes)
Watt, Hamish


Fry, Peter
Morrison, Hon. Peter (Chester)
Weatherill, Bernard


Glyn, Dr. Alan
Mudd, David
Wells, John


Goodhew, Victor
Neave, Alrey
Welsh, Andrew


Goodlad, Alastair
Nelson, Anthony
Wigley, Dafydd


Gorst, John
Neubert, Michael
Wilson, Gordon (Dundee E.)


Gow, Ian (Eastbourne)
Newton, Tony
Winterton, Nicholas


Grimond, Rt. Hon. J.
Nott, John



Hall, Sir John
Onslow, Cranley
TELLERS FOR THE AYES:


Hall-Davis, A. G. F.
Osborn, John
Mr. Spencer Le Marchant and


Hamilton, Michael (Salisbury)
Page, Rt. Hon. R. Graham (Crosby)
Mr. W. Benyon.




NOES


Anderson, Donald
Coleman, Donald
Ellis, John (Brigg &amp; Scun)


Archer, Peter
Concannon, J. D.
Ellis, Tom (Wrexham)


Armstrong, Ernest
Cook, Robin F. (Edin C.)
English, Michael


Ashton, Joe
Cox, Thomas (Tooting)
Ennals, David


Atkinson, Norman
Craigen, J. M. (Maryhill)
Evans, Ioan (Aberdare)


Barnett, Rt. Hon. Joel (Heywood)
Crosland, Rt. Hon. Anthony
Evans, John (Newton)


Bates, Alf
Cryer, Bob
Faulds, Andrew


Benn, Rt. Hon. Anthony Wedgwood
Cunningham, G. (Islington S.)
Flannery, Martin


Bidwell, Sydney
Dalyell, Tam
Fletcher, Raymond (Ilkeston)


Bishop, E. S.
Davidson, Arthur
Foot, Rt. Hon. Michael


Blenkinsop, Arthur
Davies, Bryan (Enfield N.)
Ford, Ben


Booth, Albert
Davies, Denzil (Llaneill)
Forrester, John


Boothroyd, Miss Betty
Davies, Ifor (Gower)
Fowler, Gerald (The Wrekin)


Bottomley, Rt. Hon. Arthur
Deakins, Eric
Fraser, John (Lambeth, N'w'd)


Bray, Dr. Jeremy
de Freltas, Rt. Hon. Sir Geoffrey
Garrett, John (Norwich S.)


Brown, Ronald (Hackney S.)
Dormand, J. D.
George, Bruce


Butler, Mrs. Joyce (Wood Green)
Douglas-Mann, Bruce
Gilbert, Dr. John


Canavan, Dennis
Duffy, A. E. P.
Gould, Bryan


Carter, Ray
Dunn, James A.
Grant, John (Islington C.)


Cartwright, John
Dunnett, Jack
Hamilton, W. W. (Central Fife)


Castle, Rt. Hon. Barbara
Dunwoody, Mrs. Gwyneth
Hardy, Peter


Clemitson, Ivor
Edelman, Maurice
Harper, Joseph


Cocks, Michael (Bristol S.)
Edge, Geoff
Harrison, Walter (Wakefield)




Hart, Rt. Hon. Judith
Marks, Kenneth
Silkin, Rt. Hon. John (Deptford)


Hatton, Frank
Marshall, Dr. Edmund (Goole)
Silkin, Rt. Hon. S. C. (Dulwich)


Hayman, Mrs. Helene
Marshall, Jim (Leicester S.)
Sillars, James


Heffer, Eric S.
Maynard, Miss Joan
Silverman, Julius


Horam, John
Mellish, Rt. Hon. Robert
Skinner, Dennis


Howell, Denis (B'ham, Sm H.)
Mendelson, John
Small, William


Hoyle, Doug (Nelson)
Mikardo, Ian
Snape, Peter


Huckfield, Les
Millan, Bruce
Spearing, Nigel


Hughes, Mark (Durham)
Molloy, William
Spriggs, Leslie


Hughes, Robert (Aberdeen N.)
Moonman, Eric
Stallard, A. W.


Irvine, Rt. Hon. Sir A. (Edge Hill)
Morris, Alfred (Wythenshawe)
Stoddart, David


Irving, Rt. Hon. S. (Dartford)
Mulley, Rt. Hon. Frederick
Strauss, Rt. Hon. G. R.


Janner, Greville
Murray, Rt. Hon. Ronald King
Thomas, Jeffrey (Abertillery)


Jay, Rt. Hon. Douglas
Newens, Stanley
Thomas, Ron (Bristol NW)


Jeger, Mrs. Lena
Noble, Mike
Tierney, Sydney


Jenkins, Hugh (Putney)
Ogden, Eric
Torney, Tom


John, Brynmor
O'Halloran, Michael
Urwin, T. W.


Jones, Alec (Rhondda)
Orme, Rt. Hon. Stanley
Varley, Rt. Hon. Eric G.


Jones, Dan (Burnley)
Ovenden, John
Wainwright, Edwin (Dearne V.)


Judd, Frank
Palmer, Arthur
Walden, Brian (B'ham, L'dyw'd)


Kaufman, Gerald
Park, George
Walker, Harold (Doncaster)


Kelley, Richard
Parker, John
Walker, Terry (Kingswood)


Kerr, Russell
Parry, Robert
Watkinson, John


Kilroy-Silk, Robert
Perrt, Rt. Hon. Fred
Weetch, Ken


Kinnock, Neil
Pendry, Tom
Weitzman, David


Lemborn, Harry
Perry, Ernest
Wellbeloved, James


Lamond, James
Phipps, Dr. Colin
White, Frank R. (Bury)


Leadbitter, Ted
Powell, Rt. Hon. J. Enoch
Willey, Rt. Hon. Frederick


Lee, John
Prescott, John
Williams, Alan (Swansea W.)


Lestor, Miss Joan (Eton &amp; Slough)
Radice, Giles
Williams, Alan Lee (Hornch'ch)


Lipton, Marcus
Richardson, Miss Jo
Williams, W. T. (Warrington)


Litterick, Tom
Roberts, Gwilym (Cannock)
Wilson, William (Coventry SE)


Loyden, Eddie
Rodgers, George (Chorley)
Wise, Mrs. Audrey


McElhone, Frank
Rooker, J. W.
Woodall, Alec


MacFarquhar, Roderick
Roper, John
Woof, Robert


Mackenzie, Gregor
Ross, Rt. Hon. W. (Kilmarnock)
Young, David (Bolton E.)


Mackintosh, John P.
Sandelson, Neville



Maclennan, Robert
Shaw, Arnold (Ilford South)
TELLERS FOR THE NOES:


McMillan, Tom (Glasgow C.)
Sheldon, Robert (Ashton-u-Lyne)
Mr. James Hamilton and


Madden, Max
Shore, Rt. Hon. Peter
Mr. Laurie Pavitt.


Magee, Bryan

Question accordingly negatived.

6.0 p.m.

Mr. Newton: I beg Amendment No. 5, in page 6, line 5, at end add—
'(2A) In subsection (4)(b) of section 2 (commencement and duration of licences, and rates of duty) for the words "eleven thirtieths" there shall be substituted the words "one third".'

The Deputy Chairman: With this amendment we may take Amendment No, 7, in
page 6, line 23, at end add—
'(7) Any person taking out a vehicle excise licence under Part II of Schedule 5 to the Vehicles (Excise) Act 1971 may, by giving notice in writing to the licensing authority at the time when the licence is first applied for, or not less than 14 days before the licence is due for renewal, elect to pay by twelve equal monthly instalments payable on the first day of each month'.

Mr. Newton: The meaning of Amendment No. 5 may not be immediately apparent to anyone who has not looked at the original Vehicles (Excise) Act 1971, although the Minister will be well aware of it. The amendment would remove the extra payments levied on those who

choose to buy their vehicle excise licence in three four-monthly instalments rather than buy one annual licence. The amendment goes with Amendment No. 7, which is clearer to anyone who just glances at it. That amendment would give people the clear statutory right to pay the annual vehicle excise duty, on certain conditions, by monthly instalments.
I think that the purpose of the amendments is clear, and that their justification is also clear. It arises partly from the matter which we discussed in the previous debate, the level at which the vehicle excise duty will stand after implementation of what the Government propose in the Bill. Before the increase, when the vehicle excise duty was £25 for a year, one could take out four-monthly licences, each costing £9·15. The total cost was then £27·45 over the year. By choosing to pay in three instalments instead of one lump, one was penalised to the extent of £2·45, or nearly £2 10s. in proper money.
After the increase proposed in the Bill, when the vehicle excise duty will be £40 for a year, the four-monthly licence will cost £14·65, which makes a total annual cost of £43·95. In other words, one must


now pay nearly £4 extra to enjoy the privilege of paying for one's licence in instalments. This is wrong. There should be no penalty at all for buying a licence in instalments.
In Amendment No. 7, I suggest that we should go further and give people the right to pay by monthly instalments. Some of my arguments would be very much those to which I referred in my speech in the previous debate and arise from my concern about the socially regressive nature of this tax. It tends to hit hardest at the owners of the smallest cars—people who use their cars least and can least afford to run cars at all. The vehicle excise duty is socially regressive and tends to put the biggest burden on those who can least afford to pay it. The least that the Government can do is to ease that problem, as they do many others by allowing people to pay in instalments over a period of time rather than forcing them to pay in one lump.
I feel very strongly about the problems of retired people. It is all very well for the spokesman for the Liberal Party to say that, instead of concessionary bus fares, help with motoring costs or with television licences, we should make sure that the pension is high enough to cover the cost. That is not the situation at present, nor, judging by the Government's policies, is it remotely likely to be the situation. In the real world which I inhabit, and in which I am in touch with my retired constituents, many of them have the most acute problems in meeting these lump-sum payments which arise at intervals during the year, and which must be met if they are to maintain, in rural areas like my own, basic essentials such as the running of a motor car. I should like to see this problem eased, first, by removing the discrimination against those who already buy four-monthly licences, and, secondly, by introducing a proposal enabling people to pay monthly.
I have in mind in introducing this amendment the clear-cut analogy with what is already done concerning rates. It may well be that, when the Minister replies, he will say that my amendment is not technically correct and requires a lot of alteration. I am not interested in that sort of argument. The Government can take it away and draft pages and pages of legal jargon if the principle is once

accepted. I am simply arguing the principle at this stage.
Before putting down this amendment, I looked up the Rating Act 1966, which introduced the principle of a statutory right to pay rates by instalments. In the Rating Act 1966 there are many pages of legislation dealing with the facility to enable people to pay their rates by monthly instalments. No doubt it would be necessary to devise some similar legal provisions in order to put my amendment into effect. The analogy with rates seems to me to go a long way towards supporting my argument. I hope the Minister will direct his answer to that point.
The vehicle excise duty is now, according to the Government's proposal, £40 per year. In answer to Questions last week one of the Ministers from the Department of the Environment said that the average rate payment in the district of Booth Ferry was £51. If that is so, it follows with almost mathematical certainty that a lot of people must be paying no more than £40, and they have a statutory right to pay by monthly instalments, to ease the problem created for the less well-off and the retired by these lump-sum payments.
In these circumstances, we ought now to be moving towards the same kind of proposal on the vehicle excise duty, and in due course, I hope, in regard to television licences and a number of other lump-sum payments.
Although this may appear to be a small point, it is nevertheless an important one in relation to which the less well-off could be helped significantly to budget by being able to make regular payments. It would ease their problems in meeting these great chunks of financial demand in a highly inflationary age.
I hope that the Minister will give a sympathetic reply, especially on the first of my amendments. It would be very easy to implement. I hope for a favourable reply to my proposal that there should be monthly instalments for the payment of vehicle excise duty.

6.15 p.m.

Mr. Beith: I support the two proposals outlined by the hon. Member and ask the Minister to bear in mind again the kind of person referred to already in debate—the elderly person in the rural


area who is struggling to meet the overheads on a car, the person who is not a heavy consumer of petrol or a heavy user of the car, but who at one time in the year faces a particularly heavy combined burden of vehicle excise tax and the renewal of car insurance. The Minister should bear in mind that many of them take out only third party insurance in view of the burden of overheads being too heavy for them. He must recognise the case for spreading this payment, even if he does not reduce it in the ways already suggested to him.
The system of monthly instalments for the payment of rates is already available and is greatly attractive to most of us. Even if the Minister were not to go as far as that, can he honestly defend the principle of taking additional amounts from these very hard-pressed people in the form of a penalty for paying by the existing instalment scheme? Surely the least he can do is to remove the degree of penalty which attaches to paying on the instalment scheme which already exists for the vehicle excise duty.

Mr. Sheldon: The hon. Member for Braintree (Mr. Newton) moved his amendment with obvious clarity. He asked me in dealing with it to consider the principle of the amendment rather than to niggle at the way in which it was drafted. I have always made it quite clear that in dealing with any amendment I deal with the principle. It is a very easy trick for Ministers, whether from the Treasury or any other Department, to make fun of amendments drafted with insufficient expertise, but I believe it to be the task of all Ministers to look at the point in principle and see whether it can be applied, to direct their argument in that way and to stress some of the drafting difficulties only if they are relevant.
The purpose of this amendment is to abolish the surcharge which at present exists when people take out licences in four-monthly bites rather than for the whole of the year. There is also the other amendment which would allow payment on a monthly basis. The £40 licence should come to £43·95, as the hon. Member says, if the surcharge were to stand as proposed at present, for those four-monthly licences.
The first question is why it is necessary to charge this extra amount for the two additional licences taken out during the year by a person who intends to license his vehicle over the whole year. I took the point that a number of people will not license throughout the whole year.
My point is that vehicle excise duty is an annual tax. This is how it was conceived and constructed. The four-monthly licence was introduced to help those people who might find the sum on the whole rather difficult to raise.
In the year 1974–75, 23 million vehicle excise duty licences were issued. Two-thirds of them were four-monthly licences. If there were no disincentive, as obviously provided by the charge, this could rise to 40 million if everybody took out his licence in this way. There would also be the increased cost of administration.
We estimate the direct cost of the abolition of the surcharge at £30 million. That would be the direct cost, but then there would be the increased use of four-monthly licences, which we estimate would cost another £20 million, and there would be the increase in the public sector borrowing requirement as the money would come through to the Revenue later. The increased public sector borrowing requirement would amount to about £140 million in the first year, resulting in interest charges of around £15 million.
The result of all these is that, if one wanted to retain the amount of revenue at the same level as that for which we had budgeted, there would need to be an increase in the vehicle excise duty for private cars of a further £3'50 at an annual rate.

Mr. Newton: Will the hon. Gentleman clarify those figures? He referred to 23 million vehicle licences. I should have thought that the number was smaller than that. Then he referred to a proportion of two-thirds. Did he mean two-thirds of all vehicle licences or two-thirds of the total number of private licences?

Mr. Sheldon: I was referring to the total number of vehicle licences, 23 million of which were issued in 1974–75. We reckon that two-thirds of the 23 million are four-monthly licences. That is the breakdown which I have. It means that the additional amount for each licence works out at a


figure of £1·32. That is the additional cost of each licence over the cost that it would be otherwise. Incidentally, I have just been informed that the figure of 23 million vehicle excise licences refers to cars. The total figure is 27 million.
From the additional £1·32 for a four-monthly licence, the cost of issuing each licence has to be deducted. It amounts to 85p. That is the administrative cost of issuing each licence, taking account of overheads and so on. That means that the Government receive a net sum of 47p to cover the interest forgone on the outstanding amount of the annual duty. That is the cost that the taxpayer pays. When he buys his licence on a four-monthly basis, the Government receive only 47p which has to go towards the interest which has been forgone.
I ought also to say that if we were to have all four-monthly licences—this is a serious possibility since under the amendment there would be no incentive to go for an annual licence—the increase in the cost of administration would be £20 million. If all licences were four-monthly, this could mean 50 million licences, and we would have to organise a new facility for dealing with this kind of administrative burden.
I want to deal now with the possibility of 12 monthly payments, because that magnifies the problem which I have just outlined in connection with four-monthly licences. Additional to all the problems of the cost of administration and of the public sector borrowing requirement, we have the problem of enforcement. It would be almost impossible to deal with that.
The hon. Member for Braintree compared his suggestion with the present position with local rates, and he described the administrative changes which have resulted in our being able to deal with rates on a regular payment basis. However, what is possible when dealing with immovable property in this way is not so easily done in the case of cars. Rates are related to immovable property on the basis of a continuing liability. The same cannot be said about the frequent transfer of vehicles between individuals or about the fact that vehicle excise duty is not required to be paid when a car is not kept on the road.
The liability is very easy to prove in the case of rates. It is not so easy to deal with it in the case of a motor car. With rates, it is a simple matter to trace the ratepayer and to take recovery action where necessary. These advantages do not obtain in the case of vehicle excise duty. There would be an enormous temptation for a car owner to pay one or two monthly payments and then to default. The difficulty of enforcement would be insuperable unless we withdraw the 14 days' concession which applies at present for those taking out vehicle excise licences. Even if that were withdrawn, there would still be the problem of not knowing when a car owner was due to make a payment.
Then there would be the cost of frequent checking, the cost of maintaining some sort of record and the cost of maintaining an administrative structure which would check these matters. Having answered many Questions from my hon. Friend the Member for Newham, North-West (Mr. Lewis) about vehicle licences, I am confident that there would be the additional cost of answering his innumerable Parliamentary Questions on the subject.
The hon. Gentleman's proposal, therefore, presents us with difficulties which it would be extremely difficult to overcome. As a result, I hope that he will see fit to withdraw his amendment. If he does not, I must ask my hon. Friends to reject it.

Mr. Newton: Perhaps I might comment briefly on what the Minister said.
First, I assure the hon. Gentleman that I shall not be too popular with my right hon. and hon. Friends if I decide to press the matter to a Division. However, before I withdraw the amendment or let it fall, I wish to make one or two observations.
I am staggered by the figure for the number of licences already taken out on this basis. It may be that I should have known it. In any event, it backs up my case to the hilt. Clearly we are already in a situation in which the vast majority of people find it so difficult to pay licence fees on an annual basis that they choose to accept the penalty of the additional sum required for the four-monthly licence. In one sense, that supports my argument about the burden that this represents to


people. In another sense, however, it would be more honest, next time that the Government touch the vehicle excise duty, if they do, for them to think about putting it round the other way, making the licence a four-monthly one and offering people a discount for applying for an annual licence.
I am completely unconvinced by the Minister's administrative arguments. On the last occasion that I tried to renew my own licence, I had changed my address. As a result, my application had to be sent away, and it took a considerable time to come back. I understood that part of the problem was that everything was being moved to Swansea and that computers were being put on to the operation at vast expense to the taxpayer. I understood that one of the advantages in shifting all this work to Swansea instead of leaving it in the hands of county councils was that it would be more efficient and easy to organise. Although I have a deep suspicion of computers, having seen what they have done to my gas bills in recent years, I feel that it cannot be beyond the power of the ordinary computer to keep track of whether monthly instalments are coming in regularly. If it is beyond the capacity of the Ministry's computer, the Government should look again at their proposal to centralise the work on vehicle excise licences.
I cannot believe that my proposal would be beyond the capacity of a computer. Nor can I accept what the hon. Gentleman said about enforcement problems. There are already acute enforcement problems about vehicle excise duty. I often meet people who claim to have driven round for months without a current licence and nothing has been done about it.
I accept that there are enforcement problems, but I am sceptical about the Minister's argument, which seemed hardly to convince him, that the problem would become even more difficult on the basis that I suggest. I suspect that it would be less difficult, because the vast majority of people would find the most convenient course would be to sign a banker's standing order, a Giro payment order, or some other payment on a regular basis, and

that it would be easier for the Ministry to collect the money in that way than having people go to post offices on an irregular basis and fill in additional forms.
I have two final points. I understand the Minister's financial worries. The amendment would cost the Government a good bit of money this year. That may be an argument of pure expediency for not accepting it, but it has little to do with my argument on grounds of social equity and fairness. One could look at what the Minister said the other way round, because this is a payment in advance. Why should I lend the Government this money until next March or April? Why not look at it the other way round? The Minister says that if he lets people pay later there will be a loss to the Government. I could say as a consumer that if I pay a year in advance I am giving the Government the use of my money. There is no more merit in one argument than in the other; one simply takes one's choice.
I am entirely unconvinced by what Eh;, Minister says about the difference as compared with the payment of rates by instalments. In fact, local councils have bigger administrative problems because with rates one pays in 10 instalments and not 12, so that it is a considerably more complicated organisational and administrative problem to get the money.
I have no doubt that everything the Minister has said this evening in objection to what I have put forward could have been, and probably was, said in objection to the proposal in 1966 for payment of rates by instalments. The real difference is that the central Government were prepared to impose these problems on local authorities for reasons such as those I have put forward but are not prepared to accept them for the contra'. Government.
If I felt that it would be appropriate and would be welcomed by my hon. Friends, I should push this matter to a Division. As it is, I shall not invite my hon. Friends to divide, but neither shall I withdraw the amendment.

Amendment negatived.

Clause 5 ordered to stand part of the Bill.

Clause 17

VAT: HIGHER RATE

6.30 p.m.

Sir Geoffrey Howe: I beg to move Amendment No. 9, in page 13, line 3, at beginning insert 'The Treasury may by order vary'.

The Second Deputy Chairman: With this amendment we may discuss the following Amendments: No. 10, in page 13, line 4, leave out 'shall have effect'.

No. 13, in page 13, line 11, leave out 'the rate of 25 per cent.'.

No. 14, in page 13, line 11, at beginning insert 'a rate not higher than 10 per cent.'.

No. 15, in page 13, line 11, leave out '25' and insert '10'.

No. 18, in page 13, line 14, at end insert:
'But this subsection shall not take effect unless approved by resolution of the House of Commons'.

No. 27, in page 13, line 34, leave out subsection (7).

No. 28, in page 13, line 36, leave out subsection (8).

[Mrs. LENA JEGER in the Chair.]

Sir G. Howe: The purpose of this group of amendments is to enable the Committee to discuss the principle involved in the proposal to introduce and extend the higher rate of VAT along the lines set out in this clause. It will be apparent to the Committee that the effect of the amendments is to postpone the coming into operation of the clause till a Treasury order to activate it is brought to the House, because we believe that the Government ought not to be proceeding in this way. We have made it very plain that it is the view of the Opposition that in respect of the increase proposed in vehicle excise duty and the extension of 25 per cent. VAT the Government ought to have proceeded, if they had to meet this higher liability, to raise money by raising the original rate of 8 per cent. VAT back to 10 per cent. I will tell the Committee very shortly what the substance of our complaints is, then return to the details of them.
In the first place, it is our view that the introduction and extension of the 25 per

cent. VAT is fiscally wholly unnecessary. If the Government are spending as much as they are—and we have criticised them often enough for that—so that taxes have to go up, and that must follow, the money ought not to be raised in this way. They ought never to have cut the 10 per cent. to 8 per cent., but, having done that, they ought to meet their present gap by restoring the 10 per cent. across the board. It is quite apparent from the figures that the yield from sticking with a 10 per cent. VAT for a full year is significantly higher than the yield from 25 per cent. VAT and the higher vehicle excise duty. That is my first point, that their proposal is a fiscally unnecessary consequence of their fiscal lack of wisdom in bringing in the lower rate last July.
The second criticism of the Government is that this is an example of the worst possible kind of change for the sake of change in the tax system. My hon. Friend the Member for Hendon, North (Mr. Gorst), in the Second Reading debate, illustrated why so many people are anxious at the endless tinkering with the structure of the tax system—change for the sake of change. The community was getting accustomed to the basic 10 per cent. VAT that had been introduced two years before. The pattern of concessions around it had been accepted and was understood. The administrative system was being run in. It was totally foolish, quite apart from being electorally corrupt, to reduce the rate from 10 per cent. to 8 per cent. Any relief that followed from that temporary reduction of the rate was wholly overshadowed by the administrative chaos that has since ensued.
By going down to 8 per cent. and now to be advancing to a two-tier structure of 8 per cent. and 25 per cent. alongside each other, at 14 days' notice, deliberately, with their eyes open, the Government have produced a prescription for administrative chaos. Confusion will abound, and does. That is the third reason why we criticise what the Government are doing.
To move away from the basic, single-rate structure of VAT into this two-tier pattern now proposed is indeed a prescription for administrative chaos. As I pointed out when it was rumoured that the Chancellor had this horror in mind, the administrative difficulties for traders


in operating a multi-rate tax will be enormous, most important of all for smaller businesses, and particularly, perhaps, those operated by the self-employed, who are already groaning under the many burdens imposed by this Government. Multi-rate VAT will probably be the last straw.
The Government have sought to suggest that only a modest number of traders will be affected by this. In fact, it is now becoming apparent that many more people will have to face this administrative burden. One has only to look at the huge volume of mail which I am sure, all hon. Members have received complaining of particular examples of this to appreciate the position. Look at one particular case, the antique trade, the impact of the multi-rate VAT proposal, with its curiously discriminatory impact, on gold, silver, jade and jewellery. The antique trade, which had already had special provision made for it complains in a letter sent to my hon. Friend the Member for Hornsey (Mr. Rossi) that as from 1st May when the new VAT rates came into force
we shall accordingly have five different schemes to administer: export—zero-rated; 8 per cent. general scheme, 8 per cent. special scheme; 25 per cent. general scheme, 25 per cent. special scheme.
To impose upon the many small businesses in that trade the bookkeeping burden involved in running five different collection systems alongside one another is administrative lunacy.
Not to mention the astonishing situation facing another retailer who wrote to my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan-Giles) drawing attention to the fact that VAT at the higher rate was to be charged on needles for sewing machines but not on needles for ordinary use; that VAT at the higher rate was imposed on, of all things, the paper bags with which one lines vacuum cleaner linen bags. This is the kind of lunacy that brings the tax system and those who design and administer it and the Ministers responsible for it into total disrepute.
The fourth thing we say by way of criticism is this. It will involve a very substantial and quite unnecessary addition to the costs of collecting and adminis-

tering the tax. The Chancellor told us in his Budget Statement that in respect of this change he had in mind 1,000 additional tax collectors being recruited. It is not only the burden of the tax collectors that costs money. I would reckon that for every person who mans the ramparts on the side of Customs and Excise, two or three hapless citizens with less expertise are desperately trying to defend their side of the ramparts against the burden of administration.
I will give one example, to which we shall return at greater length in Committee—the electrical components manufacturing industry. What kind of design can it be that proposes to impose tax on a huge range of components which are used in a variety of electronic equipment if it is possible that those components may also be used for radio, television or domestic appliances? I have received a letter from a constituent who is concerned with a prosperous and substantial exporting company in Ealing manufacturing capacitors. He says:
We manufacture no capacitors for the radio, television or domestic appliance market, but it is conceivable that a fair number of our types could be used in one of these applications. For us to decide whether a type is in the 8 per cent. or 25 per cent. VAT category is going to be an impossible task … it is going to involve us in considerable extra clerical work … our customers are not going to understand if we apply the 25 per cent. rate to a capacitor that is destined for, say, a radar set. We shall have to expend a lot of time in answering customers' queries.
That is only one example out of the many which my right hon. and hon. Friends have received protesting about this form of expensive administrative lunacy. The tragedy is that it was foreshadowed clearly in the report on VAT produced by the National Economic Development Office in 1969. Its report studied the experience in other countries and said quite simply:
Having more than a single VAT rate has been estimated to increase the government's administrative costs by 50 per cent. to 80 per cent. That multiple rates must also increase costs correspondingly for business enterprises is obvious".
That must have been apparent to the Government.
It is no answer for the Financial Secretary to say "But we already had more than one rate." He would be the first to complain had there not been a sensibly


designed zero rate for the commodities exempted from the standard rate. That is no justification for going down this multiple-rate road to which the Government are now committed.
The fifth reason why we complain about what is being done has to do with the mass of anomalies that will be created by the proposals. I will return to those in a moment. The sixth reason concerns those anomalies and the inevitable diminution in respect for the tax system they will bring about. Equally important, they will add significantly to the temptations to evade taxation.
Finally, and this is the heart of our case against the Government's proposal, it is quite impossible to justify the move on the grounds put forward by the Government. The proposal does not create any significant or greater sense of social justice. There is no extension of reverence for the tax system. The proposal, instead, provokes fury at yet another round of Treasury tinkering. There is the absurdity of seeing Ministers pursuing, like mediaeval monks engaged in discussions about the number of angels that can dance on the head of a pin, the distinction between essentials and non-essentials.
The change does not even help the export industry nor even hinder imports. On the contrary, it does damage to industry on all sides in a way that is wholly destructive. The Committee will not want to be wearied with a long list of anomalies, but it is important to give some illustrations to show why this proposal ought not to be before the Committee and ought never to have been before the House.
6.45 p.m.
What is the sense in imposing the higher rate of VAT on electric kettles, electric irons, electric blankets and yet to exempt from that rate gas rings, trousers presses, ordinary radiators and heaters? It is not even designed as a policy for creating fuel efficiency. It is no foundation for a plan to provide heating appliances for those who need them for health or other reasons.
What is the sense in exempting from the higher rate of VAT the hand-operated "push me-pull me" lawnmower and extending the higher rate only to the powered type of lawn mower? We look in vain for any social justification. Young, vigorous, well-paid, athletic creatures like

the Financial Secretary, able to charge up and down pushing a hand-driven mover, have the advantage of getting the mower at the lower rate of tax, but fragile, ageing creatures, like some members of the Government, needing to equip themselves with a powered lawnmower, have to pay the higher rate.
What is the sense in exempting hand saws and putting the higher rate of tax on chain saws, to the disadvantage of 10,000 to 11,000 people employed in forestry? What kind of sporting activities do the Government engage in? What kind of sporting activities, if any, do Treasury Ministers engage in? They impose a higher rate of VAT on boating, sailing, canoeing, gliding and flying, those affluent luxury-ridden sports, and yet leave the lower rate in operation for golf—we can understand the Prime Minister's affection for that—tennis, football, sub-aqua fishing and water skiing as well as hunting and shooting. I know not which members of the Government have an affection for those last two. Presumably sub-aqua fishing and water skiing are treated with such respect in view of their popularity around the Scilly Isles. What sort of division is this? Marine engines, esential for the safety of boats equipped with them pay the higher rate of 25 per cent. while motor car engines taken to the ordinary garage attract the 8 per cent. rate.
Turning to televison rental, to which we shall return later, the Government exempt from the higher rate television sets purchased before 1st May and yet impose retrospectively the higher rate on all rented sets when rental is the method used by the great majority of people. After all, it was the rich who were able to afford to buy television sets for cash on the nail before 1st May, and it is the great mass of consumers who naturally and sensibly rent sets throughout the year. Here again we search in vain for the difference between what is essential and what is non-essential.
In the past the Treasury Bench has been accustomed to make something of the existence of the frontier in the tax as originally designed between take-away food and non-take-away food. It had better take away that argument from its armoury now because it has achieved the distinction of drawing a line between take-away lavatories and non-take away


lavatories. A toilet which is installed in a boat or caravan attracts the 25 per cent. rate. If it is a nice, convenient, take-away toilet it bears the 8 per cent. rate. That is surely the ultimate in lunacy.
My hon. Friends will be dealing with the impact of the higher rate of VAT on the whole question of the servicing of domestic appliances. Apparently the lower rate is to apply to the servicing of cooking and heating appliances. Washing appliances, refrigerators, television sets, even those sets bearing the horrendous warning on the back about not opening because of the high voltage inside—all of those things which if not properly serviced can create fire hazards—will attract the higher rate of VAT. How can there possibly be any justification in that?
That leads me back to the sixth point I made earlier. This is bound to lead directly to an evasion of the tax. People will either be making use of the services of the inexpert man around the corner—perhaps sending for a Treasury Minister—to do a running repair on their electrical appliance and paying him cash on the nail or, worse still, we shall find people rendering invoices for having serviced one of the exempt appliances when they have actually serviced something on which the higher rate should be paid. This is not a frivolous point. Every change Governments make to add to the complexity of a tax that started out with a basic simplicity is a change that threatens the credibility of the tax system as a whole.
The Financial Secretary can hardly laugh at a point such as this. It is a familiar argument from the Treasury Bench that in 1957 purchase tax achieved the condition of having seven different rates. However, it is not for a Labour Government to compalin about that. When we left office in 1964 there were three purchase tax rates of 10 per cent., 15 per cent. and 25 per cent. At the end of the following Labour Government we ended with four rates between 131 per cent. and 55 per cent. The next Conservative Government gradually lowered the rate, restored the simplicity and finally introduced value added tax on the basically accepted design to which many people had become accustomed.
Finally, it is impossible to justify the shape of this tax on the grounds put forward by the Government. We shall be debating later its impact upon particular activities such as television rentals and consumer servicing. However, how can we justify the random selection of sailing and boat-building being burdened by this higher rate of tax? Last year the boat building industry employed some 30,000 people. Since then it has been facing rising unemployment. This tax could put an end to the jobs of about 10,000 people in that industry. Exports from that industry exceeded £40 million last year. What will be the impact on those exports of this higher rate of tax?
Boats are a source of pleasure for up to 3 million people, who are far from rich, from all sections of the community. More than 1 million people are registered as the owners of small dinghies. All this has been upset and disturbed for the sake of a yield of less than £10 million.
It is particularly mean and pointless to extend the tax to canoeing. Canoeing is a sport probably most enjoyed by the young. Almost every school one has ever visited and almost every youth club in the country has either got, or is in the course of constructing, a canoe. Even these activities are singled out as nonessential. No wonder that the Central Council for Physical Recreation protests at the absurdity of this change, which is likely to produce less than £2 million in one year. What a way to perform, when this year there are three world championships taking place in Britain in rowing, water ski-ing and youth sailing. Thousands of young people will face risks that are increased because of the additional tax affecting the provision of safety boats for that particular sport.
What about gliding and flying? Again they are not sports for the pleasure of the rich and they are not even sports indulged in by large numbers of people. Perhaps 10,000 people go gliding in this country and, perhaps, 3,000 or 4,000 private pilots exist for light aircraft. Why should they be singled out as operating non-essential services? In particular why should light aircraft have to face higher charges than those who hire boats, caravans and cars for recreational purposes?
What about the caravan industry? About 1½ million people enjoy caravans,


and three-quarters of them are certainly very far from the rich or wealthy classes. It is an industry that contributes to exports. Why should that have been singled out in this way?
I turn to the last argument that I wish to demolish—that in some way this skilfuly-designed artifice of Treasury Ministers will help to save imports and promote exports. By driving caravanners to take non-taxed package holidays, by driving television set renters to buy smaller and cheaper imported Japanese sets, by exposing manufacturers in the television, boat and caravan industries to the cyclical suffering of endlessly changing tax systems that have done so much damage to the industries in the past, and by exposing component manufacturers to the particular inconvenience I have mentioned, the Government can hardly hope to bridge the gap in our export situation by the promotion, which is what apparently they seek, of a larger exodus of gold, silver, jade and jewellery even before people try to get it out of the country to prevent the Government getting their hands on it in some other way.
The truth is that this change cannot possibly he justified. I wish to make it entirely plain that the Conservative Party is strongly opposed to the introduction and now the extension of the additional rate of value added tax. We shall continue to oppose it as forcefully as we can throughout the debates on the Bill.
I have no doubt that the advantages of a simple, single-rate structure are overwhelming. We shall certainly want to do everything possible to restore the original simplicity of the design of tax when we return to office. As it is now presented to the House, it is wholly characteristic of the fumbling lack of strategy that underlies this Budget. It will be seen as a futile, irritating irrelevance in face of the grave economic crisis that faces our nation.

Mr. Monro: I warmly support everything that my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) has said in relation to this pernicious increase in value added tax. I want to deal with one central issue which arises in Clause 17. This does not mean to say that I am not equally interested in the many other matters such as television rentals and services.
I want to come to the issue of why the Chancellor has singled out three sports from well over 100 in this country and increased their rate of VAT from 8 per cent. to 25 per cent. According to an answer to a Question, this increase would produce about £5 million of the £325 million which this tax is expected to produce.
Sport is responsible and it understands the Chancellor's problems and those of the country. However, it wants a fair deal. I should like to quote a letter from the chairman of the Central Council for Physical Recreation, Mrs. Glen Haig, to the Chancellor to bring home firmly that sport does not wish to be given any special priorities. She says:
It will come as no surprise to you that the governing bodies of water sport in this country greeted with dismay the news that boating and associated activities have been singled out for especially severe treatment in respect of Value Added Tax.
Let me say from the outset that we fully appreciate the tremendous problems facing you in your efforts to balance the national economy and we have no objection whatever to restrictive measures which are fair in concept and which have a bearing on the whole of sport, if such measures are felt to be within the national interest.
There is no question of sport wanting a preferential position. All it wishes is fair treatment.
I most certainly join my right hon. and learned Friend in saying that in this instance the Chancellor has his priorities wrong. He knows perfectly well that if we had continued with 10 per cent. VAT, this increase to 25 per cent. on certain items would not have been necessary. The figure of £5 million out of the £325 million borrowing requirement in the Budget is a comparative drop in the ocean. The Chancellor was somewhat vague in his announcement about what the tax will yield. This gives the impression that it has been an ill-thought-out and ill-conceived increase.
In reply to the hon. Member for New-ham, South (Mr. Spearing), the Financial Secretary said:
Further study on any reasonable scale is unlikely to produce accurate estimates along the lines indicated by my hon. Friend",
who was requesting a breakdown of the tax.
Probably rather less than half the expected £10 million p.a. yield from Groups 3 and 4 of the higher rate schedule will accrue from Group 4 (caravans) and most of the rest will


accrue from boats, parts and accessories".—[Official Report, 28th April 1975; Vol. 890, c. 65.]
There was a little over £5 million for boats, aircraft and gliders and a little less than £5 million for caravans. It was a pretty vague estimate from the start.
If the Chancellor or the Financial Secretary says in reply that there has to be a £5 million yield from Group 3 and a £5 million yield from Group 4, we would entirely disagree with the Government's priorities. We could give a long catalogue of Government savings in other directions, particularly from the Department of Industry, that could have made this insignificant total in the nation's Budget one that could have been omitted entirely.
7.0 p.m.
Why has the Chancellor singled out boating, gliding and flying as sports and leisure pastimes which must be clobbered in this Bill? I know that the Minister has had a flood of complaints. Indeed, he has received a petition which was handed in by my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan-Giles) on behalf of the Ship and Boat Builders Federation, the Royal Yachting Association and many others. That petition showed that at least 2 million people are messing about in boats in the summer, cruising, sailing and being actively competitive at weekends. These are things that all of us ought to be supporting. Indeed, more people take part in these activities than attend football matches at any weekend in the winter. This is a valuable weekend recreation in every way, for families and young people alike. Why is there an increase in the rate of VAT on boats and associated equipment to 25 per cent.?
As my right hon. and learned Friend the Member for Surrey, East said, this is not a luxury sport. The Chancellor has put the purchase or joint ownership of dinghies or small boats outwith the pockets of many people. For instance, on an Enterprise dinghy of 131 ft. the tax alone rises from £40 to £100. A Fireball, a slightly bigger dinghy of 16 ft. 2 in., is subject to a rise in tax from £60 to £250. That is a staggering increase for young people keen on small dinghy sailing.
It is not only sailors who face this penal increase but the boat builders too. They know, as the car industry knows, that they must have a strong home market in order to export. They have made a splendid effort in producing £40 million worth of exports annually. About 30,000 people are employed in British boatyards. Yet both these groups are at risk. Certainly they cannot continue to maintain this level of exports if the home market collapses—and collapsing it is. This is bound to have a direct impact on those employed in the industry. One day the Secretary of State for Industry comes in offering jobs at all costs—literally at all costs—and the next day the Chancellor comes in hammering away and causing unemployment just because he has not bothered to think through what he is doing.
These exports are influenced and emphasised by our splendid Olympic and international record as a sailing nation. Why are the Government setting course tonight to destroy the asset that we have built up over generations? It is sad to see the Chancellor so incredibly out of touch with the wishes of the nation.
My right hon. and learned Friend the Member for Surrey, East gave some anomalies. I should like to give one or two—only a few, because I know that many will be discussed in detail when we discuss the schedules in Standing Committee. It seems incredible that oars are subject to VAT at a rate of 8 per cent. yet rowlocks are taxed at 25 per cent. What on earth can be the use of an oar without a rowlock—unless the Financial Secretary is still on fixed pins at Oxford University in the 1930s?
Batteries to start outboard motors and other motors are taxed at the 25 per cent. rate. However, one may buy a car battery for one's boat and it is taxed at the 8 per cent. rate. The Minister is really setting out to cause all manner of chaos in ship chandlers' businesses and elsewhere.
Ropes, lines and mainsheets are taxed at the 25 per cent. rate. I can visualise that around all the yachting centres nylon clothes line at only 8 per cent. VAT will have an enormous increase in sales, for obvious reasons. The Minister is setting out to make this country a very dishonest place in which to live.
Rightly, my right hon. and learned Friend mentioned the question of safety. The Royal National Life-Boat Institution is zero-rated and quite clear of all this. If, however, a sailing club has a safety boat to supervise young children and others sailing in their dinghies, it must be at the 25 per cent. rate of VAT. Indeed, the same is so with rowing. We shall have the world championship in rowing here in August this year. What a thing it will be to face our visitors with the knowledge that all racing shells in Britain are subject to VAT at 25 per cent. It is hardly the way to encourage a country that is trying to raise its standards in international sport in every way.
What about canoes? If ever there was a form of sport to encourage our schoolchildren, youth clubs and educational establishments and to get youth afloat at weekends, which is something we all want to see, canoeing is it. But the rate is to be 25 per cent. on canoes. I do not suppose that the Minister has even considered what a canoe costs. When we move up to the higher echelons of international and Olympic competition—again, we are putting on a tremendous effort in coaching for next year's Olympics—we find that the price of a competition kayak will rise from £361 to £452. Where is the encouragement to get on in this competitive sport?
I hope that the Minister will bear in mind that kayaks in particular face frequent damage, especially in slalom and white-water racing. Here again, the replacement rate of boats is high. What will people do when they have to spend much more on these boats? All in all, in sailing, rowing and canoeing, we have had a mortal blow to the expansion of water sport and recreation.
Much of what I have said about boating applies also to gliding. I should like to declare a non-pecuniary interest as the President of the Dumfries Gliding Club and as a private pilot. Why has the Chancellor trebled this burden on a minor sport, which is, however, popular and includes the slightly eccentric occupations of hang-gliding—which the Chancellor might enjoy—and ballooning? This sport is enjoyed by thousands and is run by people who give their time voluntarily at weekends. I know that from my club's point of view this has meant frequent

changes of location, building hangars, assembling winches and making runways—all through their own free enterprise and without pay. That is the sort of thing that is to be clobbered by the Government. It has given many young people their first chance to fly. It is very sad indeed that this will no longer take place. Gliding has had an exceptionally high standard of maintenance and airman-ship over generations, yet this is all the thanks that people get—the raising of VAT to 25 per cent.
We have an international prestige, and some of the world's finest glider pilots operate within Britain. Their reputation has gained exports for the comparatively small number of gliders made in Britain.
There is here a strange anomaly, because VAT is at 8 per cent. on dual instruction but at 25 per cent. if one goes up solo. Normally one does a couple of circuits dual and then the instructor says "Have a trip round on your own." What about all the accountancy and paper work which will have to be carried out while a chap does a 10-minute circuit?
One can hire a boat for a row on the Serpentine or elsewhere at 8 per cent. VAT, but a trip in a glider is at 25 per cent. It is quite incredible that the Treasury and Treasury Ministers could have thought up anything quite so stupid.
I come lastly to light aviation. Perhaps someone will explain to me why the particular limit of 8,000 kg was chosen. Why is there to be an attack on light aviation and recreational flying? It is solely those categories which are being attacked, because business flying will be able to recover the tax in the normal way. The Government and the country should be pleased that young men and women are training to fly. We were certainly pleased that they were able to do so in 1939 and 1940, but I do not see any enthusiasm for them in this proposed penal taxation.
Recently we have frequently discussed ways of saving petrol. We have discussed whether less fuel would be used if we increased the cost of the road fund licence or put up the price of fuel. The Financial Secretary might care to note that over almost any distance less fuel is used in travelling by light aircraft than by car. This, therefore, is another way


of saving fuel, and in their approach the Government are going against what they say they want to achieve. There are 55,000 jobs tied up in light aviation and there could be a severe cutback. I am sure that this will be appreciated by the Secretary of State for Industry.
There is also the question of the invisible exports which are obtained through flying training for commercial pilots from overseas. The dual training will be taxed at 8 per cent. but for solo flying the rate is 25 per cent., even though the Civil Aviation Authority regulations require a certain number of hours to be flown solo before a pilot can obtain a licence. The cost of a commercial pilot's licence will therefore go up from £610 to £1,190. This means that flying schools will either close or move out, probably to Ireland or the Continent. It is illogical to expect commercial pilots from overseas to train here if they are to be treated like this.
There is also the question of radio equipment, which in aircraft is safety equipment. Transmitters, receivers and radio direction-finding equipment will be taxed at the 25 per cent. rate. Why are the Government taxing safety? Are they afraid that someone will buy a radio direction-finding set or a VHF transmitter so that he can listen to Radio 2 in his bedroom? People do not buy radio sets costing thousands of pounds to play them at home. Surely we can trust aviation purchasers who intend to fix the radios permanently in their aircraft. Can we not stick to the 8 per cent. rate in the interests of flight safety?
Before we reach Schedule 7 in Standing Committee, will the Financial Secretary meet representatives of sailing, gliding, and flying for further consideration of the incredible anomalies and the whole principle of the tax? The sum involved here is minute by comparison with the total borrowing requirement.
Will the Minister bear in mind next month that the Minister responsible for sport will be producing a White Paper on how sport, leisure and recreation can be developed? What will the Minister say when he has to discuss the development of sailing, rowing, canoeing and gliding with the interested parties? He will surely look rather foolish. I say to

the Government, for Heaven's sake think again.

7.15 p.m.

Mr. A. E. P. Daffy: I subscribe entirely to the remarks by the hon. Member for Dumfries (Mr. Monro). I wish particularly to endorse what he said about sailing, gliding and flying. I wish to confine my plea to boating and to show briefly the effect of the Bill on the British boating industry. I do not know why hon. Members should get so excited because I wish to speak. I made a plea on behalf of the boat building industry on Second Reading of the Bill, and I am anxious to do it again in the hope that some of my hon. Friends might support me. It is important that such a plea should be as broadly based as possible and should not be seen as party issue.
I hope that my hon. Friend will see as a measure of their success the fact that we are now moving into an era when flying, gliding and sailing are pursuits for all the people of this country, but especially for the working classes. It is for that reason that I am so pained that the Chancellor should have said in his Budget Statement that he intended to concentrate the 25 per cent. VAT on less essential items so that the better off, who bought more of those goods, particularly the expensive goods, would bear a larger share of the taxation burden.
I wish to question the application of this policy to boating since nearly 3 million people in Britain take their weekend recreation in that form. The vast majority of them can by no stretch of the imagination any longer be classed as among the better off. They are the ordinary people of this country, and nowhere is this more evident than in the northern industrial areas. In that part of the country one cannot get a berth for a boat on the coast and it is becoming increasingly difficult to find space on the reservoirs.
If it ever was the sport of a class, it was the sport of a class which was the backbone of those who were needed in 1939 and 1940. I am thinking of the old Royal Naval Volunteer Reserve, with which I was connected, the people who took the little ships to Dunkirk in 1940. I was not among them. I was a rating in barracks in Devonport, but I was close


enough to know their value and I know that that class of person—not a social class—helped to man the coastal forces and the many small inshore ships during the war.
That is not the only interest that I have. I was also close to the industry at that time and I was able to see something of the way in which it supplied the small ships that were needed. This was at the beginning of the war, but it provided a strong basis which half way through the war was giving us a remarkable flow of indispensable boats. I am therefore concerned for the industry.
The Government have frequently declared that they favour small industry and small firms. I see boat builders as being precisely in that category. They are essentially small enterprises and they have made and are making an increasing contribution to exports which in relation to the scale of the industry is remarkable. About one-third of its production is exported, yielding more than £40 million annually in foreign earnings. The annual import savings of the boat industry amount to about £140 million, which is equal to 45 per cent. of the sales of the entire British shipbuilding industry. Not all these figures are readily available but I hope that these points may be developed by other hon. Members because many false impressions are created and there is insufficient appreciation of the contribution of the industry to exports.
The industry is of value to us in another sense. Its work force is highly skilled and specialised, yet this new tax, coming on top of earlier marine mortgage restrictions, may cause a scaling down and redundancy as great as 20 per cent. In view of the unique character of the industry, there is little chance of alternative employment in some areas. If this work force were dispersed, it would be most difficult to reassemble it when demand recovered. Likewise, export markets once lost could be irrecoverable. I am assured that this has been the experience of the comparable Dutch industry, which when penalised by domestic taxation lost export markets which it has since been unable to recover.
We have also heard of the anomalies which could arise from the application of the tax not merely to the industry but

also to its accessories and equipment. There will be administrative problems. I do not want to deal in detail with the multi-rate structure. My hon. Friend the Financial Secretary knows my views on that. I have argued consistently against the introduction of such a structure. He knows that there is very little support in our party for such a structure. I know of no one on our back benches who favours a multi-rate structure as opposed to a single rate who, over the last few years has put forward a convincing argument to support his case.
That makes me wonder where the pressure has come from in recent weeks. It has not come from within my party. That makes me wonder whether the pressure has arisen from within the Treasury, from people who cannot be as close to this matter as the people who actually do the work. I am referring not merely to the boat industry but to all retailers. The administrative nightmares that have been referred to are by no means confined to boating enterprises.
As my hon. Friend the Financial Secretary knows, I was concerned that there should be no departure from the standard rate of VAT. I knew of the burden produced by the standard rate. I knew that it was becoming too great for retailers and commerce generally. I wanted no departure from the standard rate, but not on those grounds alone. I did not believe that the time was right, even if it ever will be right. That it should be introduced at this time, given some of the warnings that were directed towards my right hon. Friend as recently as last November, took me by considerable surprise.
I want my hon. Friend to know that some of his hon. Friends were concerned on those grounds alone. We wanted it to be known that we were aware of the problems that our late system of VAT had produced for commerce. We did not want the burden to be increased.
I am sorry that my hon. Friend the Minister of State is no longer in his place. He replied to a Written Question that was put by the hon. and gallant Gentleman the Member for Winchester (Rear-Admiral Morgan-Giles). The hon. and gallant Gentleman asked whether the Chancellor had estimated what reduction


of turnover in the boating and boat building industry would result from the proposed 25 per cent. VAT levy. My hon. Friend replied:
It is not possible to give separate figures for individual industries; these will depend, among other things, on how consumers adjust their discretionary expenditure. The Budget estimates of the revenue effect of the higher rate VAT have assumed a fall of rather less than 7 per cent. in the turnover of the producers of all the goods covered by the higher rate, other than road fuel."—[Official Report, 1st May 1975; Vol. 891, c. 200.]
I have been at pains to find out how far that is true. I have with me some figures from one of the largest members of the boat building industry. I shall not go into them because of the time, but I assure the Committee that in the number of weekly orders, monthly inquiries and forecasts for the next four months there has been the most dramatic fall. I am bewildered as to why my hon. Friend should have thought that the reduction would be no more than 7 per cent.
No other sport is being subjected to discriminatory taxation. Why has boating been singled out? Can my hon. Friend put forward any justification in logic or equity for this discrimination? Will he bear in mind the final plea of the hon. Member for Dumfries? Will he agree to receive representations soon from the representatives of the boating, gliding and sailing industries?

Mr. Edward du Cann: I count myself fortunate in following the hon. Member for Sheffield, Attercliffe (Mr. Duffy). I am sure that all of us who had the privilege of hearing the hon. Gentleman's speech would want to tell him how much we enjoyed it and admired it. The hon. Gentleman's clarity, forthrightness and good common sense were greatly appreciated by us all. If I may add a personal note, I very much appreciated his references to the West Country. I had no idea of the old wartime connection that he described. I am sure that I am not alone in the West Country in saying how much we relished the reference which he made to the prewar yachtsmen who pioneered in the early days of light coastal forces in the RNVR. There is a moral in that point in contemporary circumstances.
It will not have escaped the attention of the Financial Secretary that we have now had three speeches which have all contained devastating criticisms of these extraordinary proposals. I would describe them, as did my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), supported by my hon. Friend the Member for Dumfries (Mr. Monro), as damaging, destructive and unfair. Indeed, they are miserable and clumsy. What is worse, they are thoughtless. It is no surprise to my right hon. and hon. Friends to notice how empty during this debate have been the Government benches. It is almost as if the Chancellor's right hon. and hon. Friends are ashamed of what he is proposing.
I agree with my right hon. and hon. Friends in the criticism that they have made, but there is more to say. I dare say the hon. Member for Sheffield, Attercliffe feels, as do my right hon. and hon. Friends, that these proposals are bound to bring our taxation laws into further disrepute. That is something we can ill afford. Last but by no means least, I suspect that they will make substantial problems for the Customs and Excise. The Public Accounts Committee, of which I have the honour to be chairman, has been taking evidence from the Customs and Excise. My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) will recall the circumstances which indicated to us the immense difficulties experienced by the Customs and Excise when the tax was originally imposed. I have no doubt that the Department carried out its work, as it always does, with tact and carefulness. All the same, it is clear that a great deal of tax was under-recouped. I suspect that the problems that will result from this great jump, this selective jump and this unfair jump from 8 per cent. to 25 per cent. will cause the Customs and Excise even more administrative headaches. That is a thoroughly bad thing.
I now quote from a document prepared by the Information Division of the Treasury. It is one of a series of documents which I usually find helpful. I dare say that every right hon. and hon. Member is assisted by them. I refer to issue No. 62 for May 1975. It is called the Economic Progress Report. It will be understood that it is not a document whose chief characteristic is that of


historic accuracy. It begins with a note about the Budget. It reads:
The Spring Budget
—It seems to suggest that the Budget was a matter for gaiety and rejoicing, but no doubt it was so described to differentiate it from others in the series—
presented to Parliament on 15th April proposes measures designed to divert resources into the balance of payments and to alleviate the structural problems which have caused the economy to lag behind its competitors.
It continues:
The proposals included … a variety of measures designed to help build up our industrial base and encourage exports.
Further on it reads:
The Budget's main purpose is to make sure that the economy will be ready to take advantage of the recovery in world trade which is expected next year.
Probably the point is already clear to the Committee—namely, that in the case of those industries which it is now proposed to tax at a very much higher rate, the Chancellor's proposals will act in precisely the opposite way to the approach of his Budget strategy.
The point that I wish to make to reinforce the argument that has been put already by my right hon. and hon. Friends, and by the hon. Member for Sheffield, Attercliffe, is that the Chancellor should undertake—there would be no loss of face—to reconsider this proposal, and to do so promptly.
7.30 p.m.
I turn to the boat building industry and to the aircraft industry merely to attempt to complement what has already been said. I have to declare an interest which will be within the knowledge of many right hon. and hon. Members, namely, that I own a boat. I do not know whether I am one of the people whom the Chancellor wants to sock, but I see nothing dishonourable or unreasonable in spending one's savings on a boat rather than dissipating them in other ways. I also have the honour—and perhaps it is not inappropriate as we have a bipartisan case to put here—to be Admiral of the all-party House of Commons Yacht Club.
The facts about the boat building industry are these. The total production is £140 million and its exports of more than £40 million are about one-third of that total. The production of the boat

building industry is no less than 45 per cent. of the whole shipbuilding industry in the United Kingdom.
When I look back over the last 20 years—my time in the House—and consider the various forms of aid that have been given to shipbuilding, and all that the House has tried to do to keep shipbuilding viable and prosperous in face of foreign competition and often subsidies from other shipbuilding nations, all I can say is that in trebling the rate of tax paid by the boat building industry the Chancellor is flying absolutely in the face of history and logic.
The hon. Member for Attercliffe and my hon. Friend the Member for Dumfries said that if we are to have a successful export industry it must have a sound home base. How true that is. I draw to the attention of the Financial Secretary experience which the Dutch have had. The Dutch had a thriving boat building industry, they decided to tax it more heavily and in the end they did it irreparable harm. Our view is that the Chancellor would be foolish to run risks in respect of our home boat building industry, which consists of many small firms in which the standard of the craftsmen is still, I rejoice to say, as high as any in the United Kingdom, and that is saying a great deal.
Moreover, it is an industry which is already in recession. How extraordinary it is to clobber an industry at the time when it is not doing well. Home sales declined in the first three months of this year, because of the economic scene in general, by about 40 per cent. Unemployment has increased by 5,000. If I may speak again of the West Country, six boat building firms have gone out of business already during the past 12 months. This is in an area—Devon, Cornwall and Somerset—which cannot afford any more unemployment.
However one looks at the matter, the case for abandoning the Government's proposal is overwhelming. There is no logic in increasing the amount of tax to be paid by the boat building and boating industry. We have heard something about administrative difficulties and anomalies, and I shall not labour the point.
I do not know whether it is feasible for the Financial Secretary to answer a specific question but, having heard something


about these anomalies and knowing of them, I should like to know how many pages of detail the Customs and Excise instructions will be likely to contain to deal with items in the boat building industry. Will it be two or three, 10 or 20, or 50? Why is it that in England today we seem to have almost a death wish to complicate everything we do almost beyond endurance? If the proposal is not changed—or, better still, abandoned—the Chancellor of the Exchequer will deal the boating industry a near-mortal blow. He will also leave the United Kingdom market wide open to foreign competition just as soon as the economic situation improves.
I now turn to the subject of light aircraft, gliders and the like. The imposition of this higher VAT rate means that for a modern sport which should attract growing support from a wide cross-section of the public, costs must increase, the administrative burden of voluntary officials must increase, the danger of cost-saving economies in servicing and replacement of parts must increase and the threat of redundancies to workers in the light aircraft servicing and production industries must increase. There is also the danger, as with the boating industry, of irreparable harm to the British light aviation industry.
I recall, being an enthusiast for helicopters, having spoken of them in the House and having complained of our unenthusiastic attitude towards the helicopter as a form of transport. Incidentally, we have in the West Country the largest producer of helicopters in the world, which has one of the best export records of any industry in the United Kingdom and whose business it should be of all of us in the Committee to support and encourage.
Again, the Government always seem to adopt the attitude that here is something new, exciting, modern and worth while—therefore, "find out what little Johnny is doing and stop him", or at any rate make it as difficult for him as possible, tax him out of existence or endurance. Perhaps I am old fashioned, but I happen to think that the Government have a duty to encourage industries which are helpful and modern, which give

people innocent pleasure and carry through a useful economic or social purpose.
At a time when the Government are seeking to expand sport and recreational facilities in Britain, these new VAT proposals, if pursued, will deal a crippling blow to an expanding sport whose participants seek little or no Government financial help. Perhaps that is the mistake they make—being largely self-supporting. To attack a sport which is educational and particularly relevant to twentieth century technology is completely contrary to the announced public policy of every political party in this Parliament.
Unless the Financial Secretary is prepared to say to the Committee tonight that he will have a complete re-examination of this situation, his life will surely be made a misery in the future. It is within the memory of us all how the late Sir Gerald Nabarro—a remarkable man and one of the great parliamentarians of our time—used to tease Treasury Ministers constantly about the anomalies of purchase tax. They are as nothing to the anomalies of disparate rates of VAT, and the Financial Secretary's life will indeed be made uncomfortable for him unless he seeks to amend these proposals. I repeat, they are damaging and destructive, they are foolish and they should be scrapped.

Sir David Renton: Unlike my right hon. Friend the Member for Taunton (Mr. du Cann) I cannot claim to be the admiral even of a small elite yacht club, but I am president of the Huntingdon and Peterborough schools sailing club, with hundreds of members, young people coming from ordinary homes. The Government's attitude towards the activities which those people pursue reminds me of the Victorian educationist who acted on the principle that he could teach boys anything as long as they disliked it enough.
These young people have been given an opportunity which their fathers never had. At Graffham Water, in my constituency, which is the largest artificial lake in this country, until Empingham is flooded, we find on any summer weekend afternoon 300 small sailing boats sailed by young people from our schools. It is tragic to


think that those types of boat should be caught by this tax.
The hon. Member for Sheffield, Attercliffe (Mr. Duffy) was right when he referred to the 1939–40 period. I was reminded of the fact that most of the boats which evacuated the British Expeditionary Force from Dunkirk would have been subject to this tax, if it had existed in those days. I do not know why, but the Government do the most extraordinary things. However, the case about the boats has been so well made that I need not add very much.
On the river Great Ouse, which is also in my constituency, there are about half a dozen marinas and three small private enterprise boat builders. A young man who has just been apprenticed to one of those firms came to Parliament today, together with about 100 other young men from other parts of the country, to complain of the way in which this tax will threaten their jobs. That young man is training to be a craftsman of the type of which we have always been proud.
I know that every Chancellor of the Exchequer worth his salt keeps something up his sleeve for the Committee and Report stages of the Finance Bill. I hope that the Financial Secretary, having heard the case which was made today, will let us know that he has something up his sleeve to help in this matter.
I now wish to speak about domestic appliances. There is a factory in my constituency which makes ordinary domestic refrigerators and employs 1,000 people. I regard a refrigerator as a necessity of life, not as a luxury. A refrigerator is of great value in saving food, which is becoming a scarce commodity. Most modern homes, even of the humblest kind, are built with space in the kitchen for a refrigerator and are provided with suitable electric sockets.
The 1,000 people employed in that factory belong to five important trade unions. I have had a friendly and constructive meeting—the Secretary of State for Industry will be pleased to learn—with their representatives. I was assured by those people that they have excellent relations with the management. They volunteered that fact; I did not ask about it. They informed me that that company produces other domestic appliances in factories situated in other constituencies.

For example, washing machines are produced at Llandudno, which is in the constituency of my hon. Friend the Member for Conway (Mr. Roberts). Electric kettles are produced at Northallerton, which is in the constituency of my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson). He has to attend the annual council meeting in his constituency tonight and asks me to say that he wishes to be associated with the case I am making. Electric irons are being produced at Mexborough, in the Dearne Valley. The servicing of all those appliances made by this company is carried out from Lutterworth, which is in the constituency of my hon. Friend the Member for Blaby (Mr. Lawson), who has also asked to be associated with this case.
The Secretary of State for Industry must know that of those 1,000 people the management—having gone into the matter with the trade union representatives—estimate that 400 people will become redundant within a year as a result of the application of the 25 per cent. VAT rate. The Secretary of State for Industry should therefore complain to the Chancellor about those redundancies instead of doing what he did yesterday, when he made vigorous and irresponsible attacks upon those of us who tonight are trying to save people's jobs.

Mr. Wyn Roberts: My hon. Friend referred to a factory in my constituency which employs 1,500 people. It is the only major employer in that area, where there is now 8·2 per cent. male unemployment.

Sir David Renton: I am grateful to my hon. Friend. That reinforces my case.
The trade union representatives whom I met are in consultation with their colleagues in the factory situated in my hon. Friend's constituency.
7.45 p.m.
There is not only the question of the falling off of sales in relation to domestic appliances, thus depriving people of the necessities of life. There is a great deal of difference between a VAT rate of 8 per cent. and one of 25 per cent., or indeed 10 per cent. and 25 per cent. There is also the safety factor. If people decide to carry out work themselves instead of calling in someone to do it they run a


risk of accidents. "Do it yourself", they say.
Today I put down a Question to the Chancellor of the Exchequer asking
whether, in view of submissions that his proposal to charge 25 per cent. VAT on the cost of labour in the repair of televisions, radios and electrical goods will increase the danger of accidents and fires being caused by electricity, he will change that proposal.
I have just received the written reply, which reads,
No, Sir. I have noted the submissions but I do not agree with their conclusions.
That is surprising since more accidents are caused in the home than on the roads. There are more accidents in the home than in the factory.
The Financial Secretary seems oblivious of the fact that one of the results of the 25 per cent. VAT rate on the cost of repairs will be that some people will blow themselves to smithereens in their own homes. That alone should cause him to think again.
I think that we are in a procedural trap over the way in which this matter is discussed. Clause 17 and Schedule 7 must be read together and should be discussed together. However, they are to be voted on separately. The clause will be voted upon in Committee on the Floor of the House, whilst the Schedule will be voted on upstairs. I do not complain that detailed items are included in the schedule, as a matter of drafting and legislative convenience. However, I think that the arrangements should have enabled Schedule 7 not only to be referred to in discussion with Clause 17 on the Floor of the House but the items in it to be voted on separately. It is an important matter. I hope that in his selection of amendments on Report, Mr. Speaker will, if necessary, allow the House to vote upon separate items in the schedule.

[Mr. ARTHUR JONES in the Chair.]

Mr. Pardoe: I shall not go over the Opposition points which have already been made in the debate, as I agree with them.
The multiplicity of tax rates is confusing for the individual trader. I think that it will add to the compliance costs of those who have to collect the tax.

I ask the Financial Secretary to give the Treasury estimate of the increase in compliance costs which will be borne by those collecting the tax. Here I refer to the retailers. I do not mean the Civil Service. What is the estimate of the increased compliance costs arising as a result of increasing the VAT rate to 25 per cent.?
Secondly, I oppose the 25 per cent. rate on the ground that it will cause grave economic distortion. The multiplicity of these forms of tax rates, as with the old purchase tax, will distort the market place. Indeed, there were those who wished to have them even when VAT was introduced. By setting up the Government as the body who will decide what we ought or ought not to buy, this multiplicity of tax rates will grossly distort the market place, and I do not hold with anything that does that.
It is a good thing to let consumers choose and to have a level tax across all forms of industry unless it can be shown that there is a cost to the public of allowing the use of their products. Where that can be shown it would be better for a direct charge to be levied related to the social cost.
Why do it? The hon. Member for Sheffield, Attercliffe (Mr. Duffy) said that there was no great pressure from within the Labour Party to have this 25 per cent. rate. I was a little surprised at what he said. However, his knowledge of the Labour Party is a good deal better than that of hon. Members on this side of the Committee. But if we call it a luxury tax, we can detect some of the reasons behind the thinking. It is extremely appealing to those members of the Labour Party with whom the hon. Gentleman has less in common than even most hon. Members on this side to impose what they can flourish in radical terms as a luxury tax. Perhaps it is part of the price that the Government are paying for the non-existent social contract.
I hope that the Financial Secretary will give us the exact figures of yield. Looking at the Red Book, we see that the yield before the Budget change for VAT in 1975–76 would have been £3,054 million. That was at 8 per cent. Therefore, a rough calculation leads us to suppose that at 10 per cent. it would bring in another £760 million a year.


That is by putting it up by an extra 2 per cent. The Red Book shows that after the Budget the yield will be £3,275 million—an increase of £221 million. Therefore, it appears that the luxury rate will bring in a net yield this year of £221 million against the yield of about £760 million that we could have had if the Government had gone back to the 10 per cent. rate which they abandoned. It was a grotesque mistake.
It is incredible when we realise that that was done in July of last year to fiddle the retail price index so that the rise in the three-monthly index at an annual rate would work out at 8·4 per cent. in the month before the election had to be fought. Now, almost a year later, we are seeing changes in the Budget which tomorrow will give us a rise in the retail price index of over 2 per cent. in one month. Therefore, the rate of inflation over the last three months as from tomorrow, on the Chancellor's calculation, will be not 8·4 per cent. but just short of 30 per cent. We do not imagine that there is an election in the offing, and I guess the Chancellor does not imagine that there will be one either. Although the yield of £221 million is not to be sniffed at, £760 million is an awful lot more and would have closed the borrowing requirement gap much more than the Chancellor has.
I accept what the right hon. and learned Member for Huntingdonshire (Sir D. Renton) said about our being in a procedural difficulty in discussing this matter. I want to make my position clear on this measure. My vote tonight is not to reduce the Government's revenue from VAT but to increase the yield from VAT by about £500 million. That would have been the right decision for the Chancellor to take.
I should like to touch briefly on some constituency points. I represent a development area, a coastal area and a holiday area. Boating does not employ a large number of people in my constituency, but it does employ some. It is an industry which ought to be encouraged in a coastal development area such as mine. It fits historically and geographically. It fits historically, because my most illustrious predecessor as Member of Parliament for Cornwall, North was Sir Francis Drake. He did

not actually represent Cornwall, North, but he represented Bossiney, which was a rotten borough in it.
I think that the Government have been extraordinarily mistaken in picking out this sporting activity which, certainly in North Cornwall, is by no means the prerogative of the rich. I cannot claim to be either an admiral or a president but just an ordinary member of the Padstow sailing club. Members of the Padstow Sailing Club are not wealthy boat owners.
Cornwall, North is a holiday area. Therefore, there is a considerable contribution from caravans. Of course, caravans are not to everyone's taste, but they represent the only holiday that many families of moderate, middle and low income can afford. Hotels are beginning to price themselves out of that sort of family's holiday.
Lastly, I should like to take up the point about hi-fi. A small town in my constituency—to most hon. Members it would be a village, having an electorate of about 1,400—has become extremely dependent on one firm, Esselwood, which makes hi-fi and small radio cabinets. It took over a factory which formerly manufactured metal windows. That was withdrawn and there was a very long gap before the Department of Trade—in the old days the Board of Trade—was able to find a replacement. We managed to obtain this firm. Not long ago it ran into financial troubles and it was saved by being taken over by Fidelity.
I know that the Chancellor thinks that hi-fi is largely imported, but there is a flourishing medium range hi-fi production in this country. Indeed, Fidelity is one of the largest manufacturers, if not the largest, in that sphere. The Camel-ford factory, although it does not employ thousands of people, employs enough to be very significant in the town's unemployment figures. This factory produces a large number of cabinets.
It is an interesting industry in this context for other reasons. The Financial Secretary ought to consider seriously the extraordinary changes in taxation on this industry which have taken place. Before 1973 there was purchase tax at 25 per cent. There was then the change to VAT at 10 per cent. That gave the industry a considerable boost. In July 1974 the tax was reduced to 8 per cent.


and that gave it a further boost. Now, in May 1975, we have VAT at 25 per cent., which is equivalent to the old purchase tax at 30 per cent. How can industrialists plan their investment if they are to be subjected to these constant changes in taxation policy?
This is or has been a healthy industry until now. I fail to see how it can remain healthy. I do not know how anyone can have confidence to invest in this kind of industry if Governments, as they come and go, make these substantial changes in taxation affecting industry. It is largely because of this kind of nonsense that there is increasing awareness among British business men that the two-party system must go. British business cannot possibly go on working in the kind of climate where one party comes in and because of its nostrums of one sort or another makes this sort of fundamental change in the whole taxation structure of an industry. Heaven only knows whether, if the Tories come back, they will knock it back to 10 per cent., but there must be continuity of purpose otherwise investment will never get off the ground.

8 p.m.

Mr. Robert Adley: I agree with a great deal of what the hon. Member for Cornwall, North (Mr. Pardoe) has just said. Indeed, I agree with almost everything that every right hon. and hon. Gentleman has said so far. Like the hon. Member for Cornwall, North, I can state that my constituency is not blessed with many large employers. My constituents do not have the opportunity of going to nearby places to pick and choose employment. Like the hon. Gentleman's constituency, both historically and geographically, my constituency is closely linked with the sea. I cannot say this with absolute certainty, but I suspect that more of my constituents are employed in boat building, sailmaking, chandlery, broking, designing and shipwrighting than in any other industry.
I emphasise to the Financial Secretary that my constituents are bitter and disillusioned. They are angry and worried sick about the future. They want to know what they have done to deserve being kicked in the teeth. They have extremely good industrial relations. They employ and train skilled and qualified

men. They have excellent export figures. They are no burden on the nation whatever. What reward have they for being good citizens? As my right hon. Friend the Member for Taunton (Mr. du Cann) said, perhaps their crime must be that they have not continually had to have recourse to the begging bowl and to the Government to bail them out of trouble.
I am bound to say—looking and searching as one does for reasons why the boating industry has been picked on in this way—that the only conclusion I can come to is that the Chancellor has looked at the political complexion of those constituencies that are most likely to be affected and decided that he and the Labour Party will not lose very many votes by what they are doing to the boating industry. I tell the Chancellor, as other hon. Members have already told him, that in terms of exports and lost revenue he is making a very foolish mistake.
Not all the 3 million boating enthusiasts referred to by the hon. Member for Sheffield, Attercliffe (Mr. Duffy) sail around in "Morning Cloud". However, I detected when the Chancellor was making his Budget speech—and I am sorry to say this in his absence—a most unpleasant leer in the direction of my right hon. Friend the Member for Sidcup (Mr. Heath) when he gleefully announced his 25 per cent. VAT on the boating industry.
There are many other industries which will be severely affected. I know that many of my hon. Friends will be discussing the problems of the caravan industry and the television rental industry, to name but two. I should like to concentrate, mainly, in the few minutes at my disposal, upon the boating industry and what I can regard as the deliberate creation by the Government of unemployment and appalling anomalies in the taxation system.
Regarding the creation of taxation anomalies, I should like to refer to a letter which I have received, but it does not refer to boats. It is from the editor of a fine newspaper in my constituency called the New Milton Advertiser and Lymington Times. The editor wrote to me as follows:
The new 25 per cent. VAT on electrical equipment is apparently being interpreted very widely by Customs and Excise or the Treasury.


I ordered a number of integrated circuits for an interface for one of our computers, and was told by Texas Instruments, that those devices will in future bear VAT at 25 per cent.
Asked for an explanation, I was told that it was because they could conceivably be used in a radio! The same also applies to all resistances capacitors and tuning condensers. Who is to decide at what wattage a resistance could not be used in a radio? How is a computer manufacturer when he sells his article to claim back his VAT and work out which bits were 8 per cent. and which 25 per cent.? There could conceivably be a situation whereby the working out involved more labour than the construction of the article.
The editor added a postscript:
The last year it was practical to build a set from components was about 1930.
I feel that this Budget was framed with about the mentality of the 1930s. The unreality of what the Treasury are doing is quite staggering even by the standards of this Government.
When my right hon. Friend opened the debate he referred to the fact that people will switch their purchasing habits in order to avoid paying 25 per cent. VAT, but apparently that has not occurred to the Treasury.
Recently I asked the Financial Secretary,
Whether he proposes to take steps to ensure that purchasers of equipment, fixtures and fittings used on and in boats do not switch their purchases to retail outlets other than recognised suppliers of equipment for boats, in order to escape the 25 per cent. VAT which he proposes to levy on boats and ancillary equipment.
I shall not read the whole of his answer but the final part of it was as follows:
There is, therefore, no tax advantage in purchasing such goods from retail outlets other than recognised supplies of equipment for boats."—[Official Report, 6th May 1975; Vol. 891, c. 389–390.]
This is absolute nonsense. All the chandlers in my constituency know perfectly well that the batteries, the switches, the rope, the cutlery and the plastic cups which they supply at the moment will simply be purchased by people in the high street at 8 per cent. VAT rather than with 25 per cent. VAT which they would have to pay if they bought goods in a shop which was clearly identified with the boating industry.
My hon. Friend the Member for Taunton referred to the valuable part played by the marine industry in the economy. I should like to compare the

marine industry which we are considering this evening with the shipbuilding industry that has attracted Government largesse on an almost unprecedented scale. The marine industry—and I take my figures from those given to me by the Secretary of State for Trade a few days ago—for 1973 to 1974 showed a total turnover of £140·49 million and exports of £41·74 million. The big boys, shipbuilders of 100 gross tons and over, including naval ships, had in 1974 a total turnover of £295 million, with exports of £94 million. Therefore, the marine industry's turnover was almost half the turnover of the shipbuilding industry including naval vessels.
However, when we compare the amount of public funds made available to both industries we see a shattering difference. Taking the three years 1972 to 1975 inclusive, the shipbuilders have received in grants and loans £114·945 million from Her Majesty's Government. During that period the marine industry has received a mere £1,200 in interest relief grants and £30,000 in loans.
Here we have it in a nutshell. An industry doing its best, with good industrial relations and a good export record—everything that we should expect of our industries—is to be spitefully clobbered and kicked in a way which will inevitably damage it irreparably. I believe that we shall see a loss of exports, revenue and jobs, and the inevitable creation of a fiddler's charter to try to escape this iniquitous tax.
Therefore, I again plead with the Government to reconsider what they are doing, to consider hon. Members' requests not to reduce taxation but to revert to a 10 Per cent. rate of VAT overall, which I am sure would do a great deal more for the Government, the nation and my constituents than the Government's proposals would.

Mr. Robert Hicks: One of the fundamental arguments for the introduction of value added tax was that it was simple and had a straightforward structure, particularly when levied at the 10 Per cent. rate. Above all, it did away with the anomalies and inconsistencies associated with the former purchase tax, with its numerous rates and the arbitrary distinctions between the various products and services it covered.
The Government's proposal to introduce a multi-rate system is ill conceived and ill thought out, as well as being clumsy to operate. It will be unfair in its arbitrary application. I believe that it will revive all the problems experienced by those who had to operate purchase tax and those who had to pay the price.
I cannot understand the motivation for the Government's decision, particularly in view of the comments of the hon. Member for Sheffield, Attercliffe (Mr. Duffy). The increased tax cannot be classified as a revenue raiser, because in answer to a Question I asked on 30th April the Financial Secretary told me that the estimated yield in 1975–76 as a result of
raising the standard rate of VAT from 8 per cent. to 10 per cent. on 1st May 1975 would be about £400 million. The estimate for higher rate VAT in 1975–76 is £200 million".[Official Report, 30th April 1975; Vol. 891, c. 168.]
Like my parliamentary neighbour the hon. Member for Cornwall, North (Mr. Pardoe) with whom I do not necessarily always agree, I make this short contribution in support of the argument that the Government should have reverted to a standard 10 per cent. VAT rate across the board. Like the hon. Gentleman, I represent a rural area with a large coastline. That is not to say however that we do not feel equally strongly about the other products and services to be singled out to bear the 25 per cent. rate.
No mention has yet been made in the debate of garden machinery. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) singled out the example of lawnmowers. A lawnmower that is pushed is subjected to 8 per cent. VAT, but if it is powered it will be subjected to 25 per cent. Parallel inconsistencies are found with other gardening machinery. One example is the small garden Rotavator. With the cost of living soaring, and particularly the cost of fresh foodstuffs, including vegetables, many people are beginning to cultivate their own gardens and allotments again.
I am not saying that we have returned to the siege economy and digging for victory, but there is no doubt that there is again a groundswell in the practice of gardening. I am certain that most people are doing it not only for exercise but for

the fresh vegetables they can grow. It is also an import-saving activity. If we grow our own lettuces, we do not have to import them from Holland. If we grow our own early potatoes, we do not have to import them from Cyprus. Therefore, it is a mean act by the Chancellor to single out garden machinery to bear the higher tax.
8.15 p.m.
Boat building has been discussed at considerable length. We have heard of the industry's turnover of £140 million. It employs about 30,000 people throughout the country and has annual exports amounting to £40 million. In my constituency we have boat builders, but we have many more boat users, coming from all sections of society, right across the income scale. They are a genuine cross-section of people, sailing during the week and at the weekend on the sea and on inland reservoirs. They cannot understand why the boat industry has been singled out when the yield to the Chancellor will be less than £10 million a year.
In my constituency, located in a development area, there are a number of small boat-building companies in small coastal villages and towns such as Looe, Polruan, Calstock and Cremyll. Their jobs are threatened. They make an important contribution to the local economy. The South-West development area already suffers from lack of alternative employment opportunities. To the Chancellor, sitting in his office in Whitehall, these small companies in small coastal locations may seem to involve small numbers. They are isolated pockets on a map, but 25 people out of work in Polruan are comparable to tens of thousands out of work on, say Merseyside. Boat building is a modern growth industry and, therefore, one that the country should be backing rather than clobbering.
I should also like to say something about the effect that the multi-rate will have on the caravan industry. That industry is another success story, with an export record of about 37 per cent. of its production of caravans. It is dependent upon a soundly-based home economy. The caravan manufacturing industry directly employs 5,200 people. People's livelihoods are threatened. Again, many caravan-making centres are


in areas where alternative employment opportunities are limited.
In a constituency such as mine, on the receiving end of the tourist industry, we are in part dependent on that industry, and the touring caravan is an important component of it. Some 618,000 households are involved, and touring caravans provide a basic form of holiday making and general leisure activity for them. To these families, the ownership of a caravan is not a luxury but a way of affording a holiday in areas such as mine. Recent surveys indicate that the touring caravan is increasingly being used by all sections of society, but in particular by young marrieds with young children. For such people, the touring caravan provides probably the only means of holidaying as a family unit.
I hope that the Minister will be prepared to listen to the very strong representations from all sides of the Committee. I consider his proposals to be not only ill-conceived and ill-based. Many of them are very mean in their application. I hope, therefore, that he will be prepared to consider withdrawing the proposal to introduce the multi-rate concept and replacing it by a flat rate of 10 per cent.

Mr. John Horam: I appreciate the sincere speeches from the Opposition, and also by my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy), on the subject of multi-rate VAT. I well understand the employment difficulties which may be created and the very real hopes which may be damaged in the case of the boat building industry in parts of the West Country, the South Coast and elsewhere.
I would not like anybody to think, however, that the idea of a multi-rate VAT was not in accord with Labour Party policy. The relevant copy of the 1973 programme of the Labour Party is not, unfortunately, in the Library, but the concept of multi-rate VAT was included in that source document for both the February and October manifestos of the party. It was therefore perfectly apparent that the Labour Party would go some way towards implementing this if it attained office. Therefore, the writing was on the wall and nobody could complain of not being warned or told about it. Nobody could complain that this was not the policy of the party.
Although I respect the remarks of my hon. Friend the Member for Attercliffe—who is chairman of the economic and finance group within the Parliamentary Labour Party, of which I am the vicechairman—I think he will admit that there was at least majority support, though certainly with some dissentients, for such a policy being implemented by the Government.
The hon. Member for Cornwall, North (Mr. Pardoe) rightly said that it really was indefensible to change particular rates of VAT from Government to Government. It is almost certainly wrong to have a 10 per cent. rate, then an 8 per cent. rate, then a 25 per cent. rate and then—if my party were to lose the next General Election—be back to 10 per cent., 5 per cent. or whatever is thought to be the right rate of VAT at the time. That is economic nonsense.
If the general opinion of the country—not merely of those who support the Labour Party—were taken on this issue, I speculate that the prevailing view would be that it was right to have two rates of VAT. I suspect that most people would think it right, as a matter of taxation equity, to have two rates of VAT. I agree that what is to be included in the higher rate is a matter for considerable debate. Whether colour television sets, which make a great deal of difference to the lives of elderly people and widows on low incomes, should be included in the higher rate is a very real subject for debate, quite apart from items like boats and caravans.
If there were to be a general public opinion poll on the subject of VAT and how to organise it, I would feel confident in predicting that general consent would be given to the idea of two rates, one for necessities and one for items not quite in that class, however one defines it—certainly not exactly luxuries, I would agree. In that respect I should not like to hear in this debate any more of the pleadings which have quite justifiably been made but without that general point also being made.

Mr. Adley: Does the hon. Gentleman recall that when the last Conservative Government introduced VAT the real necessities of life were, as they still are, zero rated, so that under the Conservative


Government there was a zero rate and a 10 per cent. rate?

Mr. Horam: I accept that, too. It may be that there are three kinds of categories—the items which are zero rated, those which are at 8 per cent. and those which are now at 25 per cent.
One of the objects brought out in the debate on the introduction of VAT was that the Labour Party in principle preferred the flexibility and greater equality of a multi-rate tax on purchases to a single-rate VAT. Therefore, I would defend myself on that ground.

Mr. Pardoe: The hon. Gentleman has made two statements which interest me. First, he said that he believed that, if there were an opinion poll, people would say that they preferred the higher rate. Secondly, he said that reference had been made to this proposal in the Labour Party's programme, so that no one had any excuse for saying that it had come as a surprise. May I remind him that recently we had a very good opinion poll and that only 38 per cent. of the electorate voted for the Labour Party whereas 62 per cent. voted against it? Does not that opinion poll prove him wrong?

Mr. Horam: I suggest that that is a rather different point. I was talking about a poll on a specific subject. If we had such a poll, I believe that it would not show as low a percentage as 38 in favour of two rates of VAT. That is the simple point which I make in support of the Government's measures.

Mr. Robert Banks: I wish to draw attention to the uncertain and highly regrettable position of the effect of the proposed higher rate of VAT on certain burglar alarms and their systems.
That burglar alarms should be value added taxed at all is totally unjustified and bewildering. A recent Customs and Excise circular refers to the 25 per cent. rate applying to burglar alarms "suitable for domestic use". Most systems are the same whether they are for domestic or for industrial use. The unit is basically the same unit which performs the function of protecting the building that it is designed to protect. There is no real difference between domestic burglar alarms and industrial ones.
I am told that the rate may apply only to equipment sold over the counter. This means, for people who wish to install themselves, their own burglar alarm systems. But if installations are fitted professionally, I believe they are exempt from VAT, though there is some uncertainty about that.
The question remains whether the appliance itself is or is not charged at the 25 per cent. rate, and that would include the ancillary equipment of the burglar alarm machine, by which I mean the underfloor mats, various electric eyes and other pieces of equipment which comprise a burglar alarm system.
I hope that, before the Financial Secretary seeks to clarify a wholly contusing and regrettable situation, he will propose a zero rate for burglar alarms, systems and installations.
Crime is increasing. Up to September of last year, the annual burglary rate was 22 per cent. In some areas of the country, the number of cases of burglary rose by nearly 30 per cent. The efforts of the police to prevent crime have been to encourage householders and people in small companies—and, for that matter, large ones—to install burglar alarm systems. I see this regrettable step as gravely discouraging the police and the work which they are trying to do.
Whether an installation is installed by a professional company or by a man who seeks to save costs and do it himself is a matter which does not warrant the rate of VAT being upped to 25 per cent.
What of the small shop, where the shopkeeper lives over his shop? Part of the building is domestic, and the rest is the shop and the stockroom at the rear of the shop. Is he to be forced to pay the higher rate of 25 per cent. VAT for a burglar alarm system, whether installed by a professional company or by himself? This is the sort of example which pinpoints the disaster area of bringing in a multi-rate VAT.
The simple and essential requirement is to zero-rate burglar alarms, their associated systems and their installation. The person who has a few possessions that he wishes to protect or the person who merely wants to ensure that intruders do not break into his house should not be discouraged from taking steps to prevent a burglar from entering the premises.
This is a case which warrants special care by the Financial Secretary to ensure that all that we do prevents crime and supports the police in what they are doing to encourage people to be aware of crime and to install systems which will prevent it.

8.30 p.m.

Sir John Eden: I should like to say one thing at this stage in the debate to the Financial Secretary, and that is a word of gratitude—the only word of gratitude I shall direct his way—for his attendance throughout the debate so far. I hope that the way in which he has been heeding the course of the debate augurs well for the content of his reply. At any rate, I am sure he would wish to reflect the courtesy with which he has listened to all the speeches that have been made so far in the answer he gives by conceding the validity of the case which has been put so effectively and forcefully. In general, all those who have spoken have condemned both the complexity and the unfairness of the imposition of the higher rate and the manner in which it has been proposed in the Budget and in this Bill.
As to the complexity, the point which really needs to be taken on board by Treasury Ministers is that traders have got to breaking point. They cannot take much more. I do not know whether the hon. Gentleman really understands this. He must have contact with the individual traders in his constituency, just as we all have. He must know as well as we do what a tremendous extra burden and impost this is on people who are trying to run their businesses in circumstances of increasing difficulty. Why place this further burden on them? Why add to the complexity of their lives? Already they are experiencing a degree of frustration and irritation, but that is nothing to what will be shown after they have had experience of trying to cope with the clerical burden of this additional tax.
Then, of course, there are the administrative costs at the centre, to which my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) referred, and the additional burden we shall all have to bear through taxation for the administration of the complexities of this extra tax, this high rate of VAT.
One wonders whose idea this was in the first place and who really dreamt it up.

The hon. Member for Gateshead, West (Mr. Horam) claimed some credit for it and implied that this was to the glory of the Labour Party and would be part of its monument and memorial. I am sure he cannot be proud of what he is doing here. I suspect that there is more to it than simply the concept, as the hon. Member for Cornwall, North (Mr. Pardoe) said, of a tax on luxury goods. One is tempted to wonder whether the whole thing has not been dreamed up in a dark, dank room by some curious creatures who have no understanding of how ordinary mortals live and go about their business—and what miserable, wretched people they must be to set about working out such difficulties for the generality of our people.
I do not think that that is the explanation either. The real explanation for our having this 25 per cent. higher rate of VAT is to be found in the position the Chancellor took before the election in reducing the rate of VAT to 8 per cent. to win the election. He was then in his mood of deceiving the British people and keeping the facts from them. That was what he was about. I hope he will now face the realities of our economic situation and realise that he has to carry the British people with him.
As part of the process the Chancellor says that it is necessary to increase taxation. He was not man enough to go back on his earlier decision and accept that he was wrong to reduce VAT. He was not man enough to face up to his responsibility and accept, as we have suggested, that we should return to the 10 per cent. rate. I am sure that that would have been accepted as necessary by the majority of our people. This approach is not so accepted. The truth is that the Chancellor has failed to live up to his responsibilities. He thinks that he has found the easier way out by adding to the burdens on our people.
There are many grotesque anomalies in the tax. Attention has been drawn to them already and we shall no doubt hear of further anomalies. My right hon. Friend the Member for Taunton (Mr. du Cann) was right to remind us of our former colleague Sir Gerald Nabarro and what he would have made of this situation. We can remember the way in


which he exposed the application of varying rates of purchase tax. Yet we have to go through the whole exercise again. I would have thought that even the Treasury Bench would have learned from that experience. It appears that it has learned nothing at all.
The anomalies are apparent when we consider what has hapened with television. A 25 per cent. VAT rate is to go on television sets. If someone had bought a set a few days before the Budget he would have paid the 8 per cent. rate, yet someone who rented a set, not just a few days before the Budget but many years beforehand under an agreement which was felt to be binding on both parties, now finds that with virtually no warning the terms of that agreement are to be broken and he will have to pay the 25 per cent. rate.

The Financial Secretary to the Treasury (Dr. John Gilbert): Was there not precisely the same effect when VAT was first introduced?

Sir J. Eden: I am not concerned with what was introduced in the first place. I am talking about what is happening now. Agreements entered into are being torn up as a result of this tax. If the hon. Gentleman does not understand the extent of the extra burden on ordinary people, I do not know in what rarefied atmosphere he spends his time. He will quickly come to realise, when we develop this line of argument later, how strongly people feel about this. It is but one of the many issues on which hon. Members are being pressed by their constituents.
This higher rate of VAT smacks very much of petty partisanship. The Chancellor has struck the wrong people in the wrong way at the wrong time. I am grateful to my right hon. and learned Friend the Member for Surrey, East for making it abundantly clear that when the Conservative Party gets back to office it will return to the greater simplicity of a single rate system. That will be welcomed by the people of the country.

Colonel Sir Harwood Harrison: First, I declare an interest in that I am a boat owner. I am also a past commodore of the House of Commons Yacht Club.
We have heard a good deal about the South Coast and the West Coast. I

happen to come from the east of England and my constituency has a coastline of some 20 miles. The county of Suffolk extends a long way up the East Coast. There is the River Orwell and there is a big new marina near the thriving port of Ipswich. Then we come to the River Deben, and the coastline continues past Bawdsey. Up the River Deben are the lovely villages of Ramsholt and Waldringfield, where I keep my boat, and then we come to Woodbridge. If we continue up the coast we reach the Rivers Ore and Alde which pass Orford and which eventually reaches Aldeburgh. Along those banks can be found many small firms which build and repair boats and which give a service to the people there.
I have intervened in the debate because this afternoon about 125 representatives of the boat building industry came to the House. They were met by a number of hon. Members. For a short time towards the end of the meeting I had the privilege of taking the chair. It would have done all hon. Members good if they had seen those people, most of whom were young and were from small firms, although one or two represented larger firms. I thought that they represented the salt of the earth. They were the people whose forebears built the ships that saved this country from disaster hundreds of years ago, and who built other ships which traded during peace-time.
Those young people were full of despair at this rise in the rate of VAT. I should like to have the attention of the Financial Secretary. I know, from serving on a committee with him, of his great interest in naval affairs. I ask him to convey to the Chancellor, who represents part of Leeds and who does not perhaps understand the boating industry as well as the Financial Secretary, the following anomalies. If a boat has an anchor, it has to have a chain. They attract only the 8 per cent. rate of VAT. But what about a shackle? I am sure the hon. Gentleman knows what I mean by the shackle which connects the anchor and chain even if the Chancellor may not. That carries a 25 per cent. rate of VAT. One of the representatives I met said that if a a keel boat was brought to the quayside, time was spent in bringing it from the mooring to the quay, and this would carry a 25 per cent. rate of VAT, quite apart from the work that was done.
I was more influenced than anything by the man who asked what would happen when the bills were sent. He said that the customers would say that the price was too high and that in future they would do the job themselves. This will affect the safety of many small boats. We all know of the number of accidents that occur every year. Distressing as they are, there will be even more breakdowns because engines will not have been looked after properly. It alarms me that this may well cause loss of life.
I agree with all that has been said by my hon. Friends. We are not trying to give the Treasury less revenue. The representatives I saw today feel that their export sales, which are quite high—the figures have been given—will suffer because their home sales are decreasing. There are not one or two cancellations but tens, twenties and hundreds according to the size of the firms. This could mean a loss of revenue in VAT. I am sure that this is not what the Treasury wants. It will mean a big loss in our export trade, which we cannot afford. We cannot afford more unemployment, particularly in the areas of high unemployment which have already been mentioned.
I know from experience that the Financial Secretary is very able and understanding on these matters. I believe that more boats would be built if there were a 10 per cent. or an 8 per cent. rate of VAT than with this sudden increase to a 25 per cent rate. This applies to caravans and everything else. Above all, however, we cannot afford to sacrifice a lot of our export trade at present. I know the argument that not all these items will be subject to VAT at 25 per cent., but unless we have a flourishing home trade we shall not keep our export trade.
I should like the Financial Secretary to act on this matter on his own, but I cannot quite expect him to say more than that he will look at this subject again and confer with the Chancellor of the Exchequer. I think that enough has been said by the Opposition to satisfy him tonight that it ought to be looked at again.

8.45 p.m.

Mr. Wyn Roberts: In opening this debate, my right hon. and learned Friend the Member for Surrey, East
(Sir G.

Howe) talked of the damaging effect upon industry that this increase in VAT will have. A very wide range of industries has been discussed in the debate. I shall talk about a particular manufacturing industry which is concerned with domestic appliances.
I am sure that there are many factories and types of manufacturing which we have not been able to mention but which will be affected seriously by this increase in taxation. It is not simply which will be damaged. It is also employment. I am concerned about employment in my constituency, where, as my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) said, there is a British Domestic Appliance factory making Hotpoint washing machines and employing about 1,500 people. This factory is a major employer in the area and is located at Llandudno Junction, just inside the development area boundary. Unemployment in the district is already very high.
In the Llandudno-Conway area, from which the factory draws many of its employees, male unemployment in April was 8·2 per cent. and the average for men and women was 5·6 per cent. The 8·2 per cent. figure was above the male unemployment percentage for Wales as a whole and above the average for the development areas in Wales, while the total percentage of unemployment of 5·6 per cent. was just below the similar figures for Wales as a whole and for development areas in Wales.
There is no doubt that the total unemployment percentage in the district was reduced by the fairly low unemployment rate among women. This is partly due to the opportunities given to women at this BDA factory. I must stress that it is the only major factory of its kind in the area and that the general prosperity of the area is, therefore, very dependent on its trading position. Quite clearly, the increase in VAT could lead to a cut-back in production, because about 90 per cent. of the 7,100 washing machines made in the factory every week are for home sales and only 10 per cent. are for export.
As a result of the increase in VAT the prices of the machines made in this factory will increase by about £18 to £20. The price of tumble-driers will rise by about £10 and the price of spin-driers


by about £5. With the new prices, demand will clearly fall and this may well mean lay-offs and redundancies. I hope that the Government Front Bench are listening to me, because I am talking about growing unemployment.
The shop stewards at this factory, representing the AUEW, the Transport and General Workers' Union and the ETU came to see me on Saturday. They are coming down to lobby the House next week. They have expressed their concern, and I certainly share it.
How the Chancellor reconciles this increase with the aims of his Budget on employment I fail to understand. How does he reconcile the effects of this increase with the policies of the Secretary of State for Industry who is busy investing in keeping people in employment? I fail to understand that, too. The union shop stewards argue, quite rightly, that washing machines are no longer luxury goods, that they are essentials. They are certainly not in the same category as radio and television sets, boats, aircraft, photograph equipment, furs and jewellery which are also subject to the higher rate. If anything they are more akin to
appliances for water heating ordinarily installed as fixtures 
referred to in the list of exemptions in Group 1 in Schedule 7.
According to the Digest of Welsh Statistics, 75·1 per cent. of households in Wales had washing machines in 1972 compared with 65·5 per cent. of households for the United Kingdom generally. Our higher percentage is probably related to the fact that we have a higher proportion of men working in the rather dirty, messy extractive and manufacturing industries compared with the United Kingdom as a whole, and a smaller percentage working in the cleaner, service sector. It is these hard-working people who will be hit by the increase in tax, and it particularly affects the large families who must have washing machines.
I appreciate the Chancellor's concern at the economic situation and the need to reduce the borrowing requirement by increasing taxation, but it seems in the circumstances that he is defeating his own ends. He is causing unemployment and he could clearly bring more money

into the revenue by a return to the 10 per cent. across-the-board rate.
There is a great deal of foreign competition in the washing machine market, especially from Italy. I am making inquiries with the EEC Commission in Brussels whether this competition is absolutely fair. My constituency is not the only one where the manufacture of washing machines is a major industry. There is a very large Hoover factory at Merthyr. To do anything which hits employment in South Wales at this time of steel closures and threatened redundancies of about 7,000 or 8,000 men is folly of the first order. There were 60,000 unemployed in Wales last month, the highest April figure since 1946. I urge the Chancellor to look again at the proposal and to consider its effect on employment throughout the country.
My hon. Friend the Member for Bodmin (Mr. Hicks) said that the Chancellor could bring in twice as much revenue by returning to the 10 per cent. rate and dropping the selective application of the 25 per cent. rate. If my hon. Friend is right I see every reason for the Chancellor to reconsider his proposal.

Mr. Michael Marshall: I have been in the Chamber since the Committee began to discuss this series of Amendments and I have listened to a number of constituency speeches. Of course, there is nothing to be said against that. On the contrary, there is a good deal to be said in its favour.
I think that the Financial Secretary will agree that one of the great problems of our system under our budgetary arrangements is that only when decisions are announced do the nationwide representations start to flow. The Financial Secretary has in one sense been the unfortunate recipient of many representations. We salute him for taking them on the chin over an extended period. Having said that, I must tell him that I shall need to refer to him a good deal as regards his recent discussions with the boating industry.
I have had to say one or two hard things about the Treasury Bench in recent months. I do not suppose that it is purely because of that that the Budget has been brought to bear so heavily on my constituency. However, if that is the case and if the scale of selection on the part


of the Treasury Bench is of that order, it has done an incredible job in threatening to undermine my constituency.
My constituency has three basic industries, all of which are affected by the amendments. First, there is the retirement industry. Here I take up the point made by my hon. Friend the Member for Conway (Mr. Roberts). One of the very first representations that I had against the Budget, which has since been repeated again and again, was from a pensioner who regards the use of a washing machine as a necessity. Whatever one might say about the good old-fashioned virtue of working hard in the kitchen, it is a godsend for the elderly to have a device such as a washing-up machine. Pensioners feel very much hit by this impost. Equally, they regard the increases in service charges as a totally unfair imposition. That is an increase which many elderly people do not properly understand. They do not understand why it should suddenly come out of the blue when they made long-term agreements many years before. That increase is a matter that they cannot be persuaded to accept.
I do not believe that the Committee would accept that such increases are ever properly matched by pension increases. We must face the fact bluntly that there is no way in which pension increases can be properly computed to take account of the sort of item that we have been discussing. My first charge is that VAT increases have hit the lives of many pensioners in my constituency.
I move on to another industry in my constituency which manufactures electrical appliances. I refer to the firm of LEC, which manufacture refrigerators. It will be hit immediately by this impost. It is a company which has diversified to the extent of having joint manufacturing facilities in France and in this country. That is typical of the kind of company throughout the country which will suffer as a result of the VAT impost. It is the sort of company for which the basic United Kingdom home market is essential if it wishes to develop an export market. An impost of this order is threatening its home market. That in turn will have its impact on exports. It will also threaten employment.
I, too, have many small traders in my constituency who are involved in tele-

vision rental. They, too, have made representations to me. I also have companies involved in matters such as process measurement. As the Financial Secretary will know from his encyclopaedic knowledge of his correspondence, I have been in touch with him about Process Measurement Systems of Arundel, a company which has raised a number of specific points which I know he will consider in due course.
I find that of all the industries in my constituency it is the boat building industry to which I must turn in particular. Littlehampton, for example, is almost entirely dependent on the boat building industry and its infrastructure, such as ships chandlers. The local trade has built up around the boat building industry. The Littlehampton community will be gravely threatened by the increased rate of VAT.
9 p.m.
Here I turn to one or two matters which were brought out at a meeting earlier today at the House attended by more than 100 representatives of the boat building industry, representing builders from all parts of the country. It was a helpful occasion that encapsulated in one meeting views from right across the country not confined to the views of any one political party. It was said that VAT on a chain and anchor now stands at 8 per cent., but for the tackle, the piece that goes in between, the VAT is 25 per cent. Equally, a person who builds a boat from a kit will have to pay VAT at the 25 per cent. rate but a youth who decides to spend his money on building a motor cycle will have to pay VAT at the 8 per cent. rate. The social priorities there do not seem right.
The cash flow problems of the boat industry have accelerated in the last few years, yet the Treasury is seeking to impose a VAT tax of 25 per cent. payable on demand. That type of cash flow financing is difficult for the small boatman.
Some of my hon. Friends mentioned the problems of employment for younger people, and what they said was borne out by what we were told this afternoon. We heard from representatives from Southend that school leavers in the boat building industry were already being made redundant. There were references


to boat builders in Waterlooville who, having taken on six apprentices earlier this year, had to cancel their recruitment programme for a further six later this year.
The picture right across the country is the same. Representatives from the Midlands told us of the studies that had been made of the effect of VAT on the boat building industry in Holland. They described the decline of Dutch boat building as dating specifically from the high impost of VAT in that country. They put the question to us: will the Government never learn? We were unable to give an answer because, not representing the Government entirely in spirit and mind, we did not feel capable of producing a reply, even if there is one, which there is not.
I end by touching briefly on matters in which the Financial Secretary has a particular interest and, I trust, concern. One has to relate the taxation of the boat building industry to the saga of events over recent years. In 1966, when opening the International Boat Show in London, the then Chancellor of the Exchequer, the right hon. Member for Cardiff, South-East (Mr. Callaghan), said that he did not see any future occasion when taxes on boat builders would be increased provided they kept up their export record. At that time the boat building industry had exports below £10 million. In the near-decade since then it has quadrupled that effort to reach more than £40 million. By any token, the pledge of the then Labour Government in the sense of performance has been fully matched.
Let us come a little nearer to the present. Earlier this year sales at the Boat Show were declining, and problems were beginning to appear. By the middle of last year, although the repair and maintenance work was going well, new home sales were dramatically down. In the Autumn Budget of 1974 came a major body blow with the disallowance of loan interest as an income tax deduction for consumer purchases, including boats. The Boat Show this year saw sales once more further down and the lowest attendance in any year in its history, except in 1973 when there was a bomb scare. So the story goes on.
It was against that background that the Ship and Boat Builders National

Federation sought a series of meetings with the Government. Earlier this year the federation met the Minister of State, Department of Industry to put its case for the easement of mortgage finance. At that time the Government promised to give careful consideration to the matter. They said that they were impressed by the case put forward by the boat-building industry.
We come to March 1975. Three weeks before the Budget debate the representatives of the Ship and Boat Builders National Federation met the Financial Secretary. The minute of that meeting, reads:
He indicated that he could not anticipate the Chancellor's Budget statement, but made the point that it was an appropriate time to make representations. His attitude was helpful throughout and the Federation delegates came away with the impression that because of its effect on other industries, no relaxation of credit restrictions would be forthcoming, but neither would any further burdens.
Three weeks later a VAT rate of 25 per cent. was imposed. I know that the Financial Secretary could not have envisaged the Budget statement. However, it is clear that here we have a major industry which is vital to people living in constituencies on the coast. In this case they have identified the Government's good will and good faith in this matter with the hon. Gentleman personally.
I shall have the opportunity on the Adjournment to discuss those problems more widely. Although there will be other occasions when I shall be able to develop my arguments further, I hope that the Minister will take this opportunity to consider carefully whether the Government have been misunderstood in this matter. I think that he would do well to make the Government position clear. I hope that he will accept the arguments that this industry has been greatly affected and deeply threatened by redundancies. We shall look to him personally for assurances regarding this industry.

[Mr. GEORGE THOMAS in the Chair.]

Mr. Crawford: In Scotland VAT is in danger of being regarded as a very addled tax. However, my objection and that of my party to multi-rate VAT does not stem from the plight of the boat


builder, the glider pilot or the private flyer, although I was surprised to hear that private flying is not the province of the rich.
During Second Reading of the Finance Bill the right hon. and learned Member for Surrey, East (Sir G. Howe) spoke about the English disease. I said in that debate that Scotland did not suffer from that disease. However, Scotland is being made to pay for the profligacy of the South East of England. As usual, the House of Commons has failed to listen to the authentic Scottish voice. Scotland can sustain economic growth without overheating. Scotland must have lower tax levels in general. A VAT rate of 25 per cent. is not required in Scotland. That is the exact opposite of what is required there.
The hon. Member for Dumfries (Mr. Monro) said that he was worried about the effect of the higher rate of VAT on the nation's Olympic sporting activities. I remind him that when we have our own Government in Scotland and a Scottish Olympics team, we shall not impose high rates of VAT on these items.
There was discussion in a previous debate about the exemption to be given to different areas and different social classes. The Scottish National Party believes that there should be different treatment for Scotland. No Government of Scotland would impose a tax at this swingeing level.
I shall not make a constituency speech. Other hon. Members have already made speeches providing copy for the local papers. There are just as many caravan manufacturers and dealers in my constituency. One of the largest air training companies is situated in my constituency. Like other hon. Members, I have received petitions from men in small businesses, especially chemists, who are worried about multi-rate VAT. In small businesses at least one-half of a senior man's day at the end of the week is spent doing the books.
I have received a letter from a jeweller and optician who states:
We find that the carrying out of the system laid down is an impossibility. It means that each shop assistant has to be versed in all the procedures and that each assistant must separately record each item they are dealing with, and frankly they cannot do so. For instance, when a sporting club leave their trophies with

us for engraving the trophies that are of silver have to be charged VAT at the higher rate and those that are silver-plated at the lower VAT rate.
I could go on, but I shall not do so because it is getting late.
Small businesses have been hit hard enough. The SNP is opposed to further fiscal penalisation of the individual and of initiative. We are opposed to a multi-rate VAT which seems to appeal only to the bureaucratic mind. The trouble is that bureaucrats do not create wealth. Wealth is created by initiative. Multi-rate VAT will stifle initiative.
We support the amendment, but probably not for the same reason as other hon. Members on this side of the Committee. We support it for the reason that Scotland cannot bear to suffer any higher tax than in the past.

Mr. Robert Boscawen: Hon. Members on both sides of the Committee have made an overwhelming case for this 25 per cent. VAT discrimination against certain industries and pursuits to be dropped. I hope we can persuade the Financial Secretary to come forward with better suggestions than he has already made.
This tax rate is an ignorant and pernicious move which makes me very angry. The Chancellor told us in one sweeping sentence that the goods concerned were not essential. But what is non-essential to him may be extremely essential to some people.
I shall quote only one example of how essential certain things are to one family, although this is typical of many hundreds. I refer to a disabled family. The Chancellor tends to forget that today many electric domestic appliances are essential to certain people. In a letter to me, a constituent says:
I have psomatic arthritis which makes life difficult for me as I cannot use my right hand do any menial tasks—no lifting, gripping, squeezing, wringing. I cannot cut a slice of bread without my electric carver
I have a family of seven—six beds and sheets etc. to wash—and consider a washing machine essential, not a luxury. Now my model, worn out with hard work, has broken down and I must"—
the lady underlines the word "must"—
have a new one. I cannot wash without one. So why must I pay 25 per cent. tax on luxury goods?


There are hundreds of women in the same condition and much worse than myself. I have spent time with them in hospital.
Those are the sort of people for whom these goods are essential. That is why this is a thoughtless tax.
The case for the boating industry has been well made by all hon. Members who have spoken. I have been connected with the boating industry for half a century and have many friends in it. I know that this is a body blow to the industry.
Boats of all sizes are expensive. They have to be seaworthy. They have to be well made to be safe. They require a lot of skill and craft, and that costs a lot of money. Therefore, to impose 25 per cent. VAT on them is bound to be a body blow to the industry. It will create unemployment in a highly-skilled industry which has never been very profitable but is essential to many parts of the country. This applies not only to coastal areas, such as the West Country where I come from, but inland, since many boats and much equipment are today made inland.
9.15 p.m.
Therefore, it is a very ignorant action to have singled out this industry, together with the caravan trade. For families who like to have a family holiday together, there is no other way of getting away from their homes than by caravan, because they cannot possibly afford to go to a boarding-house, hotel or the like. Again, therefore, I say that it was ignorant in that respect.
The third point I wish to make briefly to explain why I think it is a pernicious thing to have done is that one of the most loathsome things about British society today is the growing measure of dishonesty in practically everything in life. It is not that the British people want to be dishonest, but they are tempted and encouraged in it largely by the legislation, regulations and taxes that come from Parliament. Year after year we have taxes that can be circumvented easily because of anomalies. It has been said that one can buy a hand-operated mowing machine at 8 per cent. VAT and the next week buy an engine at another shop and screw it in oneself, whereas if one bought a motor mowing machine the VAT rate would be 25 per cent. There are plenty of people who will take pride

in having got round the 25 per cent. rate by some little fiddle because of one of these anomalies.
It is a loathsome thing to increase the amount of dishonesty that exists already, but the Labour Party has done as much as anybody in this country to make people as dishonest, petty and mean-minded as they are becoming today. I am very sorry indeed that this 25 per cent. tax has been imposed.

Mr. Robert Kilroy-Silk: It seems rather extraordinary that in debating this amendment we should have a major attack on the Government for having caused dishonesty among the public. While I might have many criticisms to make of my right hon. Friend, I find it inconceivable that the hon. Member for Wells (Mr. Boscawen) should now suggest that this tax will create dishonesty within the country.

Mr. Boscawen: Does the hon. Gentleman mean that this sort of tax which is being imposed in this way will not create an enormous quantity of petty fiddling?

Mr. Kilroy-Silk: I cannot speak for the hon. Gentleman's constituents, only for my own, and I would certainly say that my constituents would not stoop to dishonesty. [Laughter.] Hon. Gentlemen opposite show an extraordinary degree of cynicism about their own constituents. I happen to believe that mine are honest, otherwise they would not have elected me. I am sure you will agree, Mr. Thomas, that it is a rather extraordinary situation that hon. Members opposite should now cast doubts on the integrity of the British people and should even suggest that the British people would stoop to dishonesty in order to evade the tax.

Mr. Ridley: Does the hon. Gentleman think perhaps that his constituents elected him because the Chancellor said inflation was down to 8·4 per cent.?

Mr. Kilroy-Silk: That is the kind of irrelevance to which we are accustomed from the hon. Gentleman.
Having listened to some of the speeches of hon. Members opposite, one could be forgiven for believing that it was not a Tory Government that imposed VAT. It seems strange that Conservative Members have discovered for the first time tonight


all the manifest difficulties and anomalies of VAT, which have been pointed out many times in the past. After all, they imposed it on the public, ruthlessly, resolutely and—dare we suggest it?—even perhaps a little dishonestly. The tax originates from that institution that they all admire and of which they so much approve, the Common Market, entry into which they forced upon the British public without even seeking their approval, let alone obtaining their consent.
Opposition Members make constituency speeches for consumption back home, with no intent to debate the issues. They should think a little more clearly about the origins of the tax and about their own record.

Mr. Norman Tebbit: If the hon. Gentleman and his hon. Friends think that VAT is such an awful tax, why do not his Government advocate abolishing it and advocate coming out of the Common Market to do so?

Mr. Kilroy-Silk: We shall, after 6th June. I had not expected to arouse so much animosity from the Opposition. I wandered into the Chamber almost like Wordsworth's lonely cloud to see what was going on. Seeing the paucity of Members on the Labour benches I thought that I might lend the Government a little support. I had hoped for the quiet, moderate reception that my hon. Friends accorded to Opposition Members. [HON. MEMBERS: "They were not here."] Precisely. Opposition Members have been heard in almost deferential silence, the kind of silence that is generally accorded only to the right hon. Member for Down, South (Mr. Powell). [HON. MEMBERS: "Oh"] The Financial Secretary to the Treasury should never be deferential.
The hon. Member for Wells said that my right hon. Friend the Chancellor seemed to have a peculiar notion of what was essential and what was a luxury. I agree, but Opposition Members seem to have spent most of their time defending the boat makers. There is a major distinction between washing machines quoted by one Conservative Member as essentials, or electric irons, and large luxury boats clogging up so many of our sea lanes. I do not think that hon. Members can sincerely suggest that there is

the same kind of case for the exception of boats from the increased value added tax as for exemption of a large range of our normal consumer durables.
My right hon. Friend the Chancellor seems to exhibit the Puritan ethic to a certain extent, in defining as luxuries many items that many people now consider part and parcel of their everyday lives, tools and implements for carrying out their everyday affairs. Yet my right hon. Friend described them in a sweeping statement as luxuries and imposed a higher rate of tax on them. I do not regard washing machines or electric irons, for example, as luxuries, and I do not believe that many people would.
I know that the debate later tonight will be concerned largely with the higher rate of VAT on television rentals. I have received many complaints from constituents, particularly pensioners, about that imposition. For many people who lead lonely and isolated lives, especially pensioners, television is one of the few sources of company and the only source of entertainment. Many such people are not only having to pay the higher rate of tax but are having to pay it retrospectively. I ask the Chancellor of the Exchequer to look at this again very seriously and very sympathetically. Television for such people, many of whom are disabled, handicapped and housebound, is not a luxury. It has come to be regarded as an essential.
In many cases they will not, because of the higher rate of VAT, give up their television. They will wish to retain the kind of company and conviviality that can be provided to such people only by their television sets. They will presumably go without more necessary things in order to retain their television. In particular, I suspect that they will go without food. I should like to support Opposition Members who have made the same point.
One of the very disturbing features of the Chancellor of the Exchequer's raising of the rate of VAT is the effect it will have upon employment levels in the country as a whole. Increasing the price of consumer durables must inevitably mean a reduction in the demand for them, because this demand is not inelastic. The demand reacts very quickly and accurately to changes in price. If the demand


for those consumer durables falls, so also will the demand for the labour that produces those consumer durables. A large part of the industrial estate at Kirkby is concerned with making the kind of consumer durables that the Chancellor of the Exchequer classes as luxuries and commodities such as are now to suffer this much higher rate of tax.
Kirkby and Merseyside as a whole, is an area of very high levels of unemployment. The level in Merseyside alone is well above the national average. The level in Kirkby is even higher. It is also, paradoxically, a low pay area. This new imposition of tax will seriously jeopardise any future employment prospects that that area might have had. The area already suffers from a series of very severe and very difficult handicaps. What is needed is help, and one would have looked to the Chancellor of the Exchequer for a more discerning, a more discriminatory and a more sensitive approach, than the somewhat blunt instrument of virtually across-the-board increases in VAT that we have had from him.
In particular, there are many juveniles in my constituency who are unemployed, and who have no prospect of obtaining a job today, tomorow, next week, or perhaps in many cases next year. There are 230 who are aged 18, who left school two years ago and have yet to find their first job, not because they are lazy, lack ability or are unwilling to work, but simply because they are unable to find suitable work in the area to which to apply their talents. It is the Government's responsibility to provide employment and career opportunities to those young people. The Government instead have reluctantly, in effect, jeopardised whatever employment opportunities those juveniles and many of their parents may have had.
It is ironic that on the one hand we should express such concern for the level of unemployment and for the plight of the people who are unemployed, and then, on the other hand, take measures which we know full well can only have the result of increasing the numbers unemployed. It is strange that a Chancellor of the Exchequer should take these measures, and admit in his speech that the effect

will be to increase unemployment, at one and the same time as my right hon. Friend the Secretary of State for Industry is attempting to bring far more industry to Merseyside and to Kirkby. Indeed, twelve advance factories have been located in Merseyside—six in Kirkby in the last year—yet whatever employment opportunities they may have created will be largely vitiated by the Chancellor of the Exchequer's measures in imposing a higher rate of VAT on consumer durables of the kind that are manufactured in my constituency.
The Kirkby Industrial Estate encompasses a range of industries, very largely engineering. Some of them are not directly manufacturing the products which are now subject to the higher rate of tax, but they are manufacturing the parts and components of those products, and any reduction in the demand for the products themselves inevitably will have its impact upon the demand for components and on the employment opportunities of my constituents.
I have on another occasion indicated my attitude to my right hon. Friend's Budget package as a whole. I should like to think that the Chancellor of the Exchequer will at least take time to reconsider some of the specific measures that he is proposing, and that he will sympathise and have the time to consider their impact not just upon the economy as a whole but upon certain sections of the economy and certain groups of individuals in society. I ask him specifically to devote more of his time to employment in areas such as Merseyside and the part of the world which I represent rather than, as he seems to be, creating unemployment. Perhaps, too, he might reconsider his decision to increase the VAT on rented television sets, especially as it applies to pensioners.

9.30 p.m.

Mr. Ian Lloyd: I hope that the hon. Member for Ormskirk (Mr. Kilroy-Silk) will not mind if I do not pursue his tour d'horizon of the industrial estates of Kirkby. It is obvious that the Committee has a great deal to learn from the hon. Gentleman, but I do not think that the reciprocal of that is true.
This has been an interesting debate. I must first express my sympathy for


the Financial Secretary. During the greater part of the debate he sat on the Treasury Bench entirely alone, like some Robinson Crusoe on a desert island. For several hours his only company was his Man Friday, the hon. Member for Gateshead, West (Mr. Horam). Finally, even Man Friday departed into the fiscal undergrowth leaving the Government benches deserted until about 20 minutes ago, when the Financial Secretary was joined by a group of political maidens.

Mr. Kilroy-Silk: Is the hon. Gentleman making some point about our political virginity?

Mr. Lloyd: No, only about the hon. Gentleman's political experience, which may or may not be the same thing.
Understandably, this debate has almost been monopolised by hon. Members representing West Country constituencies, and we have sympathy for them in the expression of their concern about the plight of the boating industry there.
The debate has also shown a surprising degree of unanimity. Perhaps that is less surprising than many might normally think in terms of the usual political controversy. Clearly there has been unanimity on all sides about the undesirable nature of this tax not only on boats, to which I intend to refer specifically, but on caravans, electrical goods and the whole range of commodities to which it will apply.
The only disagreement is about which of us has the largest boat building interest in his constituency. I only just heard my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) claim that distinction for himself. I had intended to claim it for myself. This is a controversy which probably can be solved by our being invited to each other's constituencies to verify the claim.

Mr. A. P. Costain: If this tax is enacted, I doubt whether my hon. Friend will have any boatyards left in his constituency.

Mr. Lloyd: I am inclined to accept that.
May I declare an interest? First, I have no hesitation in saying that in my leisure moments I am a yachtsman. [HON. MEMBERS: "Oh!"] I wish that more

Government supporters were yachtsmen. They would be more understanding of our predicament if they were.
Secondly, I have in my constituency probably the largest—though I am prepared to make a concession about that—and some of the most distinguished firms in the industry. I name a few of them. There is Halmatic, a firm which makes the plastic hulls for most of our yacht industry. Then there is Lewmar, the firm which makes winches which are used by our Admiral's Cup team and which exports 85 per cent of its production. A very large proportion of its exports go to the United States. It is one of the largest dollar earners in my constituency. Twice it has won the Queen's Award. There is also Westerly Marine, which is a very successful boat building firm. It has expanded dramatically over the past few years. It exports over 50 per cent. of its production, a very considerable proportion going to the United States. This is an industry which is in the forefront of the world yachting industry not only in this country but also in the United States. My experience of firms in my constituency is that the majority of them export 50 per cent., or more of their production.
What is the motivation for this tax? Is it the chip on the national shoulder flashing like a strobe light on top of the highest mast of the largest yacht in the country? Is it possibly the use of a national sledgehammer to crack—I was about to say a celebrated nut, but perhaps that phrase is likely to be misinterpreted. Even if I change the wording to "a few celebrated nuts", including possibly myself, it would still be liable to misinterpretation.
Therefore, I ask, is it the purpose to crack down on that group of distinguished and publicly conspicuous yachtsmen who spend considerable sums and a considerable proportion of their private fortunes every second year launching yachts to compete in the Admiral's Cup? That may be the intention of the Treasury, but at least if Britannia can no longer send a cruiser in circumstances similar to those in which the United Staes acted yesterday perhaps we can field a cruiser in the Admiral's Cup and bring recognition and glory to this country in a way that we cannot do by more military means.
Is it, perhaps, the triumph of an obsolete political stereotype over sensible economic judgments? It may be all of these things in some combination.
What will be the results? I suggest that they are wholly predictable. Many of them have been summarised in some of the speeches that we have heard today. There will be a catastrophic fall in the turnover of the industry. My right hon. Friend the Member for Taunton (Mr. du Cann) mentioned Holland and France, which have already gone along this road and have discovered how disastrous it has been for firms in those countries. They have lost a national lead, because at one time they were very close on our heels.
This tax will lead to the collapse of numerous firms already strained by the hire-purchase restrictions. It will undoubtedly lead to serious and perhaps, more important, highly localised unemployment. This again is something which, in the present context of our national affairs, no Government would cheerfully or honestly support.
It will certainly lead to the loss of British supremacy in significant areas of yacht technology. I have mentioned hulls, winches, rigging, instrumentation and a range of other important products in which we have a very dominant position in the world market, not least in the United States. It will lead to the whole commerce of this industry being strangulated by all the labyrinthine regulations of multiple VAT.
I very much endorse the comments of my right hon. Friend the Member for Taunton about our penchant for introducing 50 pages of regulations for each new Act that we introduce, whether it is in the fiscal or any other sector.
Finally, as another of my hon. Friends has pointed out, the tax will result in repairs and refits being drastically pruned, possibly to the detriment of safety at sea.
What are the alternatives? The onus rests on those of us who wish to eliminate a tax of this kind to propose how the Treasury can obtain its revenue elsewhere. I go along wholeheartedly with all those who have said that what should have been done was to put VAT as a whole back to 10 per cent. I say that not only because I believe that the addition

of some £200 million or £200 million-plus to the revenue would be right in the present circumstances but because I am prepared to go on record and say that within three to six months at the very latest, the Chancellor will come to the House and ask the House for a further turn-round of approximately £2,000 million in net revenue for the central Government—obtained either by a reduction of a further £1,000 million of Government expenditure plus a further £1,000 million of taxation or by some combination of the two.
When we compare the figures we are talking about with these prospective magnitudes, I have no doubt where the Government will stand. If the Chancellor will not give an inch, let him at least remove the restrictions on hire purchase if he wants some of his tax paid. Otherwise, because of the financial situation in industry, there will be no one to buy the products and pay the tax.
If neither of these alternatives appeals to the Chancellor, let him consider some fiscal means to prevent the collapse of the export markets of these firms. The Chancellor may not know left from right, politically or otherwise. Certainly he does not know port from starboard. The Prime Minister's continual boast which we hear so often, that the Government have taken the country from a three-day week to far better economic horizons, is now beginning to wear thin and sound hollow. This is an example of what I can only describe as 3-D Government—doctrinaire, damaging and disruptive. If I may choose alternatives to those three adjectives, I would use "discriminatory", "disinterested" and "disillusioned". This tax will add a severely disillusioned industry to a profoundly disillusioned country. It should not be put on the statute book.

Mr. Peter Snape: It is with some reluctance that I intervene at this stage. I hope that in the short time I have been a Member of the House I have not given the impression of being an unduly truculent character. But listening to some of the speeches by Tory Members, I never fail to be amazed by their general hypocrisy. They and many of their equally patriotic friends in Fleet Street are rampaging the country—some of


them are rampaging Western Europe or even further afield—selling this country short and telling everyone how this wicked Socialist Government are undermining confidence and how, if this wicked Government remain in office for much longer, the whole economic structure of our nation will be eroded.
At the same time as Tory Members and their friends spread their pernicious doctrine, they regularly propound in the House fiscal policies which they proceed to attack outside it. Neither they nor their friends in Fleet Street can say that personal consumption should be reduced and then complain when a Socialist Chancellor decides to do just that. Many Labour Members are critical of some aspects of this Finance Bill, particularly Clause 17.

9.45 p.m.

Mr. Michael Marshall: Will the hon. Member tell us when he came into the Committee? He is quoting what some of my hon. Friends have said. Since we have been debating this from about half-past six, it would help if he could confirm the time that he arrived here. It will give us some idea how much he has heard of what we have said.

Mr. Snape: The hon. Member thinks that financial matters are the prerogative of the Conservative Party. I and my hon. Friends have an equal right to speak in this or any other debate. If the hon. Gentleman resents Labour Members making contributions, irrespective of whether he agrees with them, I suggest that, like many of his hon. Friends, he is not the democrat he professes to be.
No one would say that household goods are luxuries. We all regret that the Chancellor has imposed the 25 per cent. rate of VAT on such commodities. As my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) has said, there is a majority in the Tory Party that embraces wholeheartedly the principle of VAT as representing one more step on the road to Rome. That majority can hardly complain that multi-rate value added tax is a feature unknown within the Common Market. They can hardly complain that what the Chancellor has proposed is an innovation as far as this tax is concerned. On this, as on so many other issues, they want it both ways. They want to make

nice constituency speeches. They want to make the local newspaper readers appreciate their wholehearted devotion to the task of looking after their constituents in this House and in Committee, and yet they wish to attack the Government for attempting to reduce public consumption one way or another.
There are some Labour Members who, I hope, are a little less cynical about these matters than some Conservative Members. I listened with some interest to the hon. Member for Wells (Mr. Boscawen) talking about tax evasion and how this measure, like others, would increase the tax evasion industry in this country. Far be it for me to cast aspersions upon Conservative Members, but one or two hon. Gentlemen have made a fairly lucrative living out of advising other people on how to evade their financial responsibilities. There are quite a few Labour Members who deplore the attitude taken by the hon. Member for Wells, knowing the backgrounds of some of his hon. Friends.
I should like also to refer to the contribution made by the hon. Member for Havant and Waterloo (Mr. Lloyd), who I notice has left the Chamber despite the fact that it is custom and practice in Committee to listen to the speech following one's own. The hon. Gentleman referred to the 25 per cent. rate of VAT on boats. I do not think that any of us in our wildest dreams or by any stretch of the imagination could say that a boat was an essential in this day and age. All of us deplore the employment effect of VAT on the boat building industry.
Again we come back to the double standard inequitably adopted by the Conservative Party. Conservative Members are quite prepared to attack the car workers, the builders, the railwaymen and the coal miners for the amount of money they spend. They are quite ready to attack those groups of workers for demanding, in the case of the railwaymen, the horrific sum of £35 a week for 40 hours' work. From what I know of railwaymen, there are comparatively few railwaymen who would have their names down or their orders in for any boats. Surely it is a matter for my right hon. Friends to decide which sections of this community are best able to bear the financial penances which we must all undergo.
Without wishing to be accused of expounding the politics of envy, I argue that those with the broadest backs should certainly bear the biggest burden. If a particular section of society feels that a boat or the acquisition of a boat is essential to the maintenance, preservation or even the increase of its standard of living, I am not one of the people who say that it should not have one. But in the current economic circumstances the Minister is quite right to say to those people that if they can afford a purchase of that kind, they should be good patriots—as hon. Gentlemen opposite always profess to be—and, perhaps, contribute a little something to the Exchequer in order to alleviate or reduce the burden of others.

Mr. Toby Jessel: Is the hon. Gentleman aware that 62 per cent. of boat owners are in what the advertising industry describe as "socio-economic group C", which includes skilled workers, teachers, bus drivers and people like that? Does he not accept that the true reason for the Government putting this penal tax on boats and boating is that it is a sport for doers rather than for watchers?

Mr. Snape: I shall be charitable enough to ignore the second part of the hon. Gentleman's intervention for the nonsense that it was. On the first part of his question, I never like to categorise into socio-economic groups A, B, C or D. As far as I am concerned, people are people. Unlike the hon. Gentleman, I do not read the sort of journal which categorises people in this fashion. I can only say that the hon. Gentleman has attained some publicity lately because of his proposed one-man Common Market meeting. What he has just been expounding is perhaps a doctrine which he could better expound at that meeting. Not only could he put that point forward, but he could answer it himself.
I turn to the whole question of multi-rate VAT, on any commodities or any range of goods. I have received petitions from various retail groups—like many hon. Members, I presume. One of these petitions was signed by over 400 people. They have been asking that multi-rate VAT should not be introduced in the current Bill. Obviously the administrative problems which such an introduction will bring about will be considerable. They

will add a great deal to the burdens already being borne by many small shopkeepers and others who work in the retail trade. But again, when VAT was introduced as a successor to selective employment tax we were told what a splendid and logical piece of tax raising machinery it was. With the benefit of hindsight, perhaps, after a couple of years or so of VAT, I have come to the conclusion that compared with VAT, selective employment tax was a charitable gift from the gods to British industry, and that the whole principle behind VAT is surely a nonsense. I know that my hon. Friend the Financial Secretary shares my view about the origins and background of the introduction of VAT.
However, we return to the question of credibility. Opposition Members, as is their wont, have been talking about political honesty. The hon. Member for Wells said that the present Socialist Government were bringing about a general lowering of standards of honesty. It was surely the epitome of dishonesty to suggest two years ago that the introduction of VAT would somehow be far more beneficial to industry and to the payer than its predecessor, SET. Now, after two years of VAT it is being suggested that because on a comparatively minor range of commodities VAT has been increased to 25 per cent. the whole structure, fabric and integrity of British society has been damaged.

Mr. Boscawen: Perhaps I may interrupt the flow of eloquence about this matter and repeat what I was trying to suggest. The more we load this country with detailed legislation and ever more complicated taxes, the more we invite the anomalies and the opportunities for people to try to find a way around them. That creates petty dishonesty, going wider and wider, and that is what I object to.

Mr. Snape: The hon. Gentleman does not seem to wish to understand the point that tax evasion within the Common Market is recognised as a thriving business. Some of his hon. Friends have thriving businesses in the same sort of thing. Multi-rate VAT, as I tried to say earlier in the hope that the hon. Gentleman and some of his hon. Friend would at least try to understand, is not an innovation in the EEC, and tax evasion within the EEC is a thriving industry.
Many thousands of much maligned workers in Britain have no opportunities to evade their taxes or financial responsibilities. The hon. Member for Hertfordshire, South (Mr. Parkinson) can shake his head until it falls off, but that happens to be true. Those of us who are members of the PAYE club have no opportunity to evade our taxes—nor do we desire any such opportunity. Unlike some Opposition Members, we do not set ourselves up as super-patriots because of that, but at least we have some measure of self-respect because we can contribute towards bringing about the sort of society which we wish to embrace.

Mr. Cecil Parkinson: The hon. Member should take a look some time for his own education at the scale of travelling expenses and subsistence allowances that, for instance, the old ETU collected. Many people who are assessed PAYE draw subsistence allowances and travelling expenses which more than cover the cost of subsistence and travel.

Mr. Snape: I would hazard a guess that it is a long time since the hon. Member was a member of the ETU. if he ever was.

Mr. Parkinson: I never was.

Mr. Snape: I was a little diffident about saying that, but with his background I would have been surprised if the hon. Member had been a member of the ETU. Is he referring to the executive members of that union, the full-time officers or the members as a whole?

Mr. Parkinson: rose—

The Chairman: Order. I hope I may join in. Let us return to the amendment.

Mr. Snape: I must apologise for having been drawn up the electrical path by the hon. Member, but he seemed to be making a relevant, if obscure, point on the clause.
The Opposition may huff and puff about what they term an unjust, drastic and terrible imposition on the people of this country, but in their honest moments, perhaps in reflective mood, I am sure they would agree that the imposition on boats and shipbuilding will affect a comparatively small number of people.
I join my hon. Friends in regretting the imposition of VAT on electrical goods and the inevitable financial penalty which will be imposed on those least able to bear the burden. Unlike the Opposition, however, I try to make some effort to understand the Chancellor's problems. We know, the Opposition know and the whole country knows that they were contributed to in no small way by the incompetence of the previous Conservative Government.

Mr. Tebbit: I shall not take up the points raised by the hon. Member for West Bromwich, East (Mr. Snape). The only thing I shall say about his speech is that it was probably a good one the first time it was made, round about closing time some weeks ago. As for his general remarks about tax avoidance, I am sure that on some other occasion the Chief Secretary would like to deal with those who have made a very good living, a lucrative living, out of advising people on how to avoid the more ridiculous taxes which have been imposed upon them. At times I am tempted to believe that he feels that he might soon be made redundant and that the Bill is part of his pension fund, because no doubt he will return to his former job.
I do not propose to add to the general case that 25 per cent. VAT is a particularly stupid measure even from this particularly stupid Government. I do not intend to deal with the items which are covered by this higher rate. My hon. Friends have dealt with those aspects throughout the debate when the Labour benches were empty, except for the unfortunate Minister who sat there listening. It is very unfortunate for a Minister to have to listen to a succession of speeches telling him that his policies are wrong when he does not have any of his hon. Friends to support him. We should return straight away to the general 10 per cent. rate of VAT. No doubt we shall do so before very long.
10.0 p.m.
I deal with the imposition of the 25 per cent. rate as it is to be levied on aircraft and flying. First, the revenue will be extremely small compared with the work created for the individuals involved in the industry and for those involved in its collection, including the Treasury. Even when we consider the


Chancellor's somewhat erratic aim, it is clear that there are a host of grotesque anomalies. The Bill proposes to place 25 per cent. VAT on aircraft of less than 8,000 kilogrammes that are designed for recreational or pleasure use. If anyone can find in this country an aircraft of more than 8,000 kilogrammes that has been designed or adapted for recreational pleasures, he will surprise all the experts in the industry.

Dr. Gilbert: I am grateful to the hon. Gentleman for giving way. I am sure that he is making a forceful point, but will he explain why that distinction was introduced in the Finance Act 1972 by the then Conservative Government?

Mr. Tebbit: I am not responsible for that Act. I am making my own speech. I am speaking about the distinction between 8 per cent. and 25 per cent. VAT. If the Minister is proposing to take without criticism any legislation that was passed by my right hon. Friends, all well and good, but let him explain his legislation right now. It may be that he wants to include in item 3(b) of Group 3 of Schedule 3 aircraft which are used for what is known as joy-riding. If so, I should remind him that that is not a different operation from tourist trips on London Transport buses.
Does the description to which I have referred mean anything at all? Is the weight of 8,000 kilogrammes the dry weight, the empty weight, the equipped weight, the maximum authorised take-off weight, the maximum authorised taxi weight or what? Why the limit of 8,000 kilogrammes? Is it to catch the recreational flier but not the business and commercial flier? Presumably that is so. If that is so I must tell the Financial Secretary that he has the wrong weight.
I have before me a copy of Flight of 6th March, which contains a private aircraft guide. The largest aircraft listed in the guide are light twins of up to 6,000 lbs. gross weight whereas 8,000 kilogrammes is approximately 17,600 lbs. A typical light twin is the Cessna 310. The aircraft has a maximum weight of 5,500 lbs. That is less than a third of the Chancellor's limit. That aircraft, when equipped with reasonable avionics and deicing equipment, is priced at over £60,000 excluding VAT. That is hardly the sort

of thing that the private owner is likely to buy for fun.
An 8,000 kilogramme aircraft is something like a Learjet. They are priced at £500,000 a time. They are obviously not intended for private use. That sort of aircraft is bought by business concerns for business use and by air taxi operators. Not even light twins are normally bought by private owners. There are approximately 1,400 privately-owned singleengined aircraft in this country and 200 privately-owned light twins. Those are aircraft that are used for purely private purposes. I doubt whether more than 10 of those aircraft are above 5,000 lbs., let alone anywhere near 8,000 kilogrammes.
One class of aircraft which presumably will be caught and I hope that the Financial Secretary will reassure us about this—is the vintage military aircraft which is preserved by museums and individuals in private flying collections. A Gloster Meteor, for example, weighs in at 14,700 lb. and on this the Chancellor will have his pound of flesh. But to what end, except to wreck the prospect of saving these aircraft which give pleasure to many millions of people? Will there be an exemption for aircraft which are more than 10 or 15 years old? That would be helpful. Does "aircraft" in the Bill include aircraft no longer in flying condition?

Sir David Renton: It is not merely that these aircraft as museum pieces give pleasure to people in our generation. If they do not find their way into museums in our generation later generations will resent our folly in preventing that from having happened.

Mr. Tebbit: My right hon. and learned Friend is right, but that will not be the only folly of this generation which succeeding generations will regret. That is for certain.
If aircraft are no longer in flying condition, can they be classed as something else, for example as scrap, subject to 8 per cent. VAT? If they are classified as scrap, supposing some are then restored to flying condition? Would they then go back to being subject to 25 per cent. VAT? The Chancellor has to think these things out.
My feeling on reading the Bill is best summarised in the expression "Gerald


Nabarro, please come back, all is forgiven". Unless his ghost is seen during the proceedings on the Bill, I for one shall never believe in ghosts. This is the stuff that Gerald Nabarro fought against for years and now the same rubbish is coming back again.
I give the Minister a piece of advice. If the Chancellor must persist in this idiocy he should at least choose the right weight, the right cut-off limit, which is probably 5,000 lb. not 8.000 kilograms, which is the CAA AOC weight limit, at the very highest.
Then there is the question of the definition of parts and accessories. Schedule 7, Group 3, Item 7, tells us that the 25 per cent. will be levied on parts of aircraft which are of a weight of less than 8,000 kilograms, and we find that there are certain exceptions:
except parts within the exceptions from Item 5 of Group 1".
If we turn to Item 5, Group 1, we find that among the exceptions are wheels other than steering wheels, casters and tyres and parts of such goods. Does that mean that an aeroplane is taxed at 25 per cent. but its wheels are taxed at 8 per cent.?
What sort of lunacy is the Bill? Who drafted it? Was it drafted by a "temp" brought in from Rentaclot who had never drafted anything before? It is an absolute mess. Apparently, parts will carry 25 per cent. VAT and accessories 8 per cent. What is a part of an aircraft and what is an accessory? Are navigational lights part of an aircraft? Is de-icing equipment an accessory? The British Light Aircraft Centre does not seem to know—and it does not know because the Treasury cannot tell it.
Lunacy of lunacies in a lunatic Bill, what about a hook fitted to an aircraft for the purpose of towing a glider? The aircraft is taxed at 25 per cent., the glider is taxed at 25 per cent. but the hook to tow the glider is taxed at 8 per cent.
Even more extraordinary, the British Light Aviation Centre has been told—and I quote from the BLAC newsletter:
Although the Customs and Excise Officials are seeking clarification of the situation, a glider flight winched into the air carries 8 per cent. VAT but an aircraft-towed launching carries 25 per cent. VAT.

What on earth is anyone to make of this legislation? By the time the avoidance experts have got to work on it there will not be much revenue for the Chancellor, but the work he will cause and the hurt he will cause will do many small businesses and many people a great deal of harm.
It is all very well to say that nobody needs a boat, but somebody needs a job building a boat, and someone needs a job in the aircraft clubs and in the small aircraft firms conducting these operations—

Mr. Snape: Will the hon. Gentleman give way?

Mr. Tebbit: No. I regret that I cannot give the hon. Gentleman the courtesy of giving way, but he did not give the Committee the courtesy of listening to the debate which had been going on long before he came in.
Not least, the proposals are a tax on safety. For example, it is proposed that aircraft radios will be taxed at 25 per cent. Yet those radios are safety equipment not only for the aircraft on which they are fitted but for all other aircraft using the same air space. The maintenance charge is to be taxed at 25 per cent. There will be a 25 per cent. tax on the charge made for the issue of a maintenance certificate, which is also required for safety purposes. Whether that tax will be levied at all times I doubt, but it will certainly bear heaviest on those who are least able to pay it.
The Opposition suggested that yachting and flying were minority sports of the rich. I should like to quote a letter from the London Transport central road services sports association flying club. It was written by the chief flying instructor and addressed to the BLAC. The chief instructor, Mr. Parker, wrote:
As you know, this club is run for employees of London Transport and it enables our bus driver and conductor members to enjoy the pleasures of flying at a price which is within their means.
That is what private flying is all about now. One of the contestants in tomorrow's national air race, who will be flying a Tiger Moth aircraft, is a London bus driver. This is not a sport which is reserved only for the rich.

Mr. Snape: What about the rest of them?

Mr. Tebbit: The CAA report showed a few years ago, as did last year's report on businesses and general aviation in the south east, that approximately 30 per cent. of owners of private aircraft had an income of less than £3,000 a year. That referred to 1973. Again, that is hardly a rich man's sport.
It is not only the purchase price of aircraft which is subject to VAT. The aircraft hire charge is also subject to it. That hurts the bus drivers and others of modest means who wish to fly, glide or fly a balloon as opposed to taking a holiday in Majorca, or a package trip—and a good many of them do that, too.
It is a total idiocy that a 25 per cent. rate of VAT should be imposed on flying and not on other sports. Even within the ambit of those items which are to be taxed at 25 per cent. there is extraordinarily discriminatory treatment against flying. People can hire a boat by the hour, a holiday boat, or a caravan for up to 28 days and pay 8 per cent. VAT. However, the hire price of a glider, a balloon or an aeroplane is subject to the 25 per cent. rate. Will the Financial Secretary tell us why that should be so? I imagine that the reason is either prejudice or ignorance. It is prejudice and ignorance which is unfair to many people. It damages trade—not least the invisible earnings arising from the training in Britain of pilots from overseas. Solo flying will bear a VAT rate of 25 per cent. However, the rate will be only 8 per cent. if a student is accompanied by an instructor. Solo flying is a requirement for the issue of a pilot's licence and for its retention.
Mr. Rex Smith, the managing director of CSE Aviation, tells me that his company now earns £1·5 million a year from training foreign pilots in Britain. He tells me that this new imposition will add £580 to the cost of training a commercial pilot. Although companies can recover the cost, individuals cannot.
10.15 p.m.
Competition from overseas schools is already tough. This tax will lose business to firms like CSE. It will lose jobs for their employees and good trade for this country. It would be surprising if, under the twin burdens of 25 per cent.

VAT and the CAA's grossly inflated charges on licence holders and aviation generally, firms like CSE did not go abroad to the Republic of Ireland or the continent of Europe where business matters seem to be better understood than here in Westminster.
This part of the Bill in its attitude to aviation and those who find their living or pleasure within it encapsulates the whole of the Government's failings which are the cause of our rocketing unemployment, our soaring inflation and our plummeting pound. It is, again, ignorance and prejudice. The whole of the Bill, particularly this part of it, is ill-considered, badly drafted, complex and shot full of nonsensical anomalies. It will be ineffective for its declared purpose. It is unfair, arbitrary, senseless and hurtful to those who have no need to be hurt. Above all, it embodies the greed, the envy, the malice and the incompetence which are the hall marks of British Socialism today.
I know that all my hon. Friends will be in the Lobby tonight to vote against the 25 per cent. VAT [HON. MEMBERS: "All?"] All my hon. Friends will be in the Lobby tonight. I hope that the Liberals will also be in the Lobby. I hope that the Scottish nationalists, especially those who spoke against the 25 per cent. rate of VAT, will stay on to vote against it, although I rather doubt that.
This is a particularly scruffy and obnoxious part of a particularly scruffy and obnoxious Bill. I will say nothing about what I think of those who bring it forward.

Mr. Winterton: I shall endeavour to be brief, but I should say straight away that I am delighted to have four Treasury Ministers to listen to my contribution.
I believe that multi-rate VAT is a crass stupidity and deplorable nonsense. However it is not my intention to attack the Government but rather to point out the error of their ways and obtain their sympathy and support for some of the points which I intend to make, so that at a later stage amendments can be brought in, not necessarily by the Opposition but by the Government, to improve the Bill and remove some of the more unpleasant anomalies.
Much has been said about the big yachts and boats and all the equipment that goes with them. I want to direct the attention of the Committee to the boats and canoes at the other end of the scale. Canoes and small sailing dinghies are used by youth-training organisations, youth clubs and voluntary bodies such as the scout movement to train young people and to give them an awareness of safety in sailing. I believe that boats at the smaller end of the boat building scale should have applied to them the 8 per cent. VAT, not the 25 per cent. rate. Otherwise many of these bodies, already sadly affected by inflation and the inability of local authorities to help them because of their serious rate burdens, will have to do without the accessories and equipment which are vital for youth training and youth recreation.
I should like to mention a very human matter. Some people in this country suffer from hypothermia and arthritis and live in thoroughly unsatisfactory housing conditions. These people need low-voltage electric blankets. Often those blankets for people suffering from hypothermia and living in unsatisfactory housing conditions are provided by local authorities. But the rate of VAT on the low-voltage electric blanket is to be increased from 8 per cent. to 25 per cent. I ask for the sympathy of the Treasury Bench in this matter. I hope that at least this item can be left at the present rate.
I move on to a ding-dong subject, that of bell-pushes and accessories, bells and chimes. Here again there is an anomaly. Many people in the building trade believe that such items constitute a fixed electrical installation, just like a ceiling rose, socket outlet and so on, and should have the 8 per cent. VAT rate levied on them. The Government have slipped up again, because bell-pushes and chimes, which must be considered vital in multistorey blocks of flats, maisonettes and other modern housing, will bear the higher rate.
I ask Treasury Ministers to consider these anomalies. I am not just trying to make constituency points or trivial points to the Government's disadvantage. I am trying to draw attention to the error of this legislation which will cause much suffering and hardship to many people.
At this point it is perhaps right to mention the smaller business man who,

because of multi-rate VAT, will perhaps have to fork out extra money, at a time of serious liquidity problems, to change his accounting machines and stationery. The Government have loaded enough burdens on to business people. This could well be the last burden which will drive many of them out of business.
I conclude with a reference to the caravan industry, which a number of hon. Members have mentioned. Touring caravans are now an important part of our society. Many people on low wages and salaries use them for their family holidays. They cannot afford to stay in hotels and therefore take a touring caravan when they go away to the seaside.
The industry is a big exporting industry. In 1974 the home market took about 25,000 units and the export market just under 14,000, which is a fine export record. The industry needs a stable home market order to have a good export market. The Government would gain a great deal of popularity by removing the anomaly affecting this industry and by ensuring that the lower rate of VAT applies to caravans, particularly touring caravans.
I have tried to be brief. This has been a long debate. Before some of the interventions from the benches below the Gangway on the Government side of the House, it was a constructive and useful debate. I congratulate the Financial Secretary on having listened to the whole of it, and I thank him.
I have tried to be non-controversial and to be helpful to the Government, which is not my wont. I see an injustice here and I want it to be put right. That can be done only by the Government. I ask them to make sure that it is done before the Bill goes on to the statute book.

Dr. Gilbert: Thanks to the generosity of the Chair, we have heard very little about the amendments in the course of this long and vigorous debate. It is not surprising—

The Chairman: Order. Even Ministers are not allowed to cast reflections on whoever has been in the Chair. No doubt the Minister would like to withdraw that remark.

Dr. Gilbert: Of course, Mr. Thomas, I would withdraw if you thought that was intended as a reflection on yourself. I


never meant anything of the sort. I was trying to compliment you and your predecessors in the Chair on your generosity.
If hon. Members will listen to the effect of the amendments for a moment they will possibly think that my remarks are not very wide of the mark. Amendment No. 28 would cause the clause to have effect from the date of Royal Assent, which in the first place would involve a great deal more forestalling. We have already had to alter our own arrangements to help the trade. Another consequence of Amendment No. 28, and I do not recall hearing any Tory Member refer to it, is that tax paid since 1st May would have to be refunded. The question would arise as to whom the refund would go and how it would be possible for traders to identify the customers who should receive the refund. In addition to that, it would cost the Exchequer £80 million this year.
Amendment No. 27, if taken with the other Opposition amendments, would maintain the 25 per cent. rate on petrol and similar products but would eliminate the regulator power for petrol. I should be surprised if that was the intention of the Opposition. The other amendments. Nos. 9, 10, 13, 14 and 15, would, if adopted, produce the most extraordinary situation. They would result in a multi-rate structure with not two positive rates but three. They would produce an 8 per cent., 10 per cent. and 25 per cent. rate structure.
The Opposition have been saying that they wanted to get back to a one, positive rate system. The right hon. and learned Member for Surrey, East (Sir G. Howe) talked about the essential purity of a one-rate structure. The effect of these amendments would be to produce a three-rate structure with a much lower yield than the two-rate structure which is before the Committee. The effect of all of these amendments taken together would be to reduce the yield from £200 million to £20 million in 1975–76 and from £325 million to £50 in a full year. I hope that Tory Members, who presumably will divide the Committee shortly, will bear in mind the nature of the proposals upon which they will be voting.
It will come as no surprise to hon. Members when I say that it is no part of

my defence of the multi-rate system to say that it is free from anomalies. Of course it is not. Anomalies are inescapable in any system of indirect taxation. What sticks in my gullet is to hear Tory Members talking about all the anomalies of the multi-rate system and then to think of all the hours that I and my right hon. and hon. Friends and the hon. Member for Ives (Mr. Nott) spent during the 1972 Finance Bill proceedings dealing with anomalies. They kept us at it day after day, night after night.
The right hon. Member for Taunton (Mr. du Cann) warned me that I should have to spend a great deal of time dealing with anomalies as a result of our proposals. That may be so. That is probably the burden of any Financial Secretary. I am glad to have the right hon. Gentleman's acknowledgment of it. I can tell him that I am spending far too much of my time now dealing with the anomalies left over from the proposals introduced by his colleagues when they were in government and for which he presumably voted in 1972.
Let us look at one or two of them. Tory Members zero-rated medicines but left it to us to zero-rate appliances for the disabled. They zero-rated new construction but it was left to us to zero-rate "do-it-yourself" house builders. They zero-rated fuel but it was left to us to zero-rate wood logs.
Only this week I took a decision which flowed directly from the legislation of the last Conservative Government. The hon. Member for Worthing (Mr. Higgins), who was Financial Secretary in that Government, wrote to me drawing my attention to an anomaly concerning pensioners' rail cards. We intend to eliminate that anomaly and to zero-rate these cards by an extra-statutory concession. That is one more anomaly we have removed which was inherent in the VAT legislation introduced by the Tories.
10.30 p.m.
Conservative Members say that they want to get back to the simplicity of the single rate. I take it that they would resist proposals for any harmonisation with the typical rate structure to be found in the EEC. Of course VAT involves burdens for traders, and of course the Government are grateful for their co-operation in the collection of the tax. I


refuse to believe that businessmen in this country are so much less efficient than their counterparts in the other member States of the EEC or that they are unable to cope with tax systems as complex as those of the other EEC States. If the business men of France and Belgium can cope with four positive rates, if the business men of Ireland can cope with six and those of Italy with seven, it is hard to believe that two positive rates will bring the economic ruin to this country that Opposition Members have been suggesting.
Of course nobody wants to put up taxation, but everybody knows that it was inevitable that the Chancellor of the Exchequer should put up taxation in the circumstances of his last Budget and that this had to involve increases in indirect taxation.
I was asked why VAT should not be 10 per cent. across the board instead of the multi-rate system. The answer is perfectly simple. We did not want at that time, if we could avoid it, to tax the more essential items. However the higher rate is not intended to be a tax solely on luxuries, and possibly some of my hon. Friends may have got the wrong impression there. My right hon. Friend in his Budget Statement made it perfectly clear that the need for revenue was so great that the higher rate of tax would have to be applied to a great many items found in consumption in the great majority of households.
What we have sought to do is, as far as possible, to confine the application of the higher rate of tax to what I believe are generally known as "big ticket" items so as to eliminate problems for the small shopkeeper. Before the multi-rate tax proposals were known, I was inundated with petitions from pharmacists and representations from chambers of commerce and small traders up and down the country. I cannot recall having had a single letter from a pharmacist since the proopsals were known. They have been very carefully tailor-made to avoid the sorts of problems for the small trader of which hon. Members were fearful in advance.
Let me say quite clearly that we on this side of the Committee are emphatically in favour of a discriminatory system of indirect taxation—and so also, I suspect,

are the Liberal Party, the Conservative Party and all other parties, whatever they may say. If we are not in this Committee as a whole in favour of discriminatory taxation, why do we have zero rating at all? Why do we have excise duties at all? If hon. Members are not in favour of discriminatory taxation, they should be standing up and saying that they want a one-rate sales tax to apply to every item of expenditure, whether it is alcohol, tobacco, mink coats or children's shoes. Such a proposition would, of course, find no friends anywhere in the House of Commons.
I make no apology at all for the introduction of a multi-rate system. In Committee upstairs we will look at all the detailed points put to us by hon. Members today, though I must say that my right hon. Friend the Chief Secretary and I might be forgiven for having certain reservations about that commitment, bearing in mind the experience we had in relation to the capital transfer tax. Every time we undertook to look at something, it was treated as an indication of weakness rather than as an indication of open-mindedness and being prepared to look at a case put fairly to us.
However, be that as it may, a lot of what appears in our proposals before the Committee today rests in fact upon the lessons of Sir Gerald Nabarro. That is precisely why, where items attract a 25 per cent. rate, the parts of those items and the servicing of those items also attract the 25 per cent. rate.
I know that a great many Opposition Members are particularly concerned about the affairs of the boating industry. We have listened to many very serious and, I quite accept, non-partisan speeches on behalf of the boating industry. In particular I have in mind those of the hon. and gallant Member for Eye (Sir H. Harrison), who is the ex-commodore of the House of Commons Yacht Club, and the hon. Member for Dumfries (Mr. Monro).
There is no question whatever of boating having been singled out as one form of recreation against all others. One had only to listen to other parts of the debate to hear complaints that gliding was being singled out, that sailing was being singled out, that flying was being singled out, that caravanning was being singled out


and that television watching was being singled out. There is no singling out of any one individual form of recreation.
I was asked whether I would see a deputation front the boating, flying and gliding interests. I am always prepared to see a deputation. I saw a delegation from the boating trade before the Budget. I was able to give its members no encouragement. Whether they still want to see me, I do not know. If, however, the hon. Member for Dumfries cares to make the necessary arrangements, I shall be happy to see them.
When we come to discuss the detailed points of our proposals in Committee upstairs, I shall be able to set a great many fears at rest, including those concerned with some of the matters raised by the hon. Member for Chingford (Mr. Tebbit). But I am quite clear that the principle of this tax is absolutely right. I am grateful for the support of those of my hon. Friends who have taken part in this debate to say so.
I commend these proposals to the Committee.

[Sir MYER GALPERN in the Chair)

Mr. David Howell: It seems to be the unhappy lot of the Financial Secretary to be left on the burning deck defending the indefensible. It is clear from what he said that, when he had to do the same thing with regard to the capital transfer tax, it scorched into his soul. There is something deserving of sympathy in the picture that he paints of himself, working away, amending and improving, as a Financial Secretary should, existing tax legislation on the statute book, only to find, when he feels that he is making some progress, that suddenly he is overwhelmed by this new 25 per cent. absurdity which is dumped on his desk.
The hon. Gentleman must have felt in need of more support than his own benches gave him. The only support that he had was from the hon. Member for Gateshead, West (Mr. Horam), who came rushing into the Chamber to report that distinct traces had been found in Labour archives of support for a multi-rate VAT and, therefore, that we should not have been surprised by these present develop-

ments. Apart from that, the hon. Gentleman received very little support, and it is not surprising, after what we heard, that support should be so thin from both sides of the Committee for the absurdities of this new proposal.
I begin not so much with the consumer end, though I shall come to that, as with the industrial end and the industrial effects of this proposal. The 25 per cent. high-rate VAT is a marvellous example of the remotness of economic policy makers and advisers on taxation, whether in the Treasury or Transport House—and there has been some discussion about its origins—from industrial realities.
The hope of home manufacturers and home producers when VAT came in was that the days of yo-yo taxation, with tax levels going up and down so that it was impossible to plan long runs and to provide productive programmes had gone for ever. That was the intention, and my hon. Friend the Member for Bodmin (Mr. Hicks) described it eloquently. There was a real hope—and it was echoed on both sides that, for all the anomalies and difficulties about VAT, from now on we should create the right tax environment in which industry could proceed, insulated as far as possible from the overall vagaries of demand management and of world and home demand.
It was believed that, in terms of fiscal reform, we would minimise the burdens which successive Governments had succeeded in imposing on our home industries.
Now we are back to square one. We are back to the high rate for certain items, and this will result in a definite setback for many industries. It will mean that new investment plans do not go on, that new products are postponed and that plans for new marketing endeavours are put back. It will also mean that the capacity of home industry to produce new products for foreign markets will be significantly weakened.
The idea which seems to be in some minds—perhaps not in the Financial Secretary's that in some way, by placing the high-rate VAT on certain items, imports would be restricted, is already being proved totally and utterly wrong. It is the foreign manufacturers of these goods who will be unscathed. They will


not worry too much that the British market has collapsed a little this year. They will be getting on with their plans and thinking up new products. When things pick up here once again, as one day I hope they will, they will be the manufacturers who will sweep into the market as never before, because our firms in these groups and schedules have been penalised.
This is a heavy price to pay for the void which exists between the making of tax policy and industrial policy. It is something we shall live to regret when we see the way in which certain people are kicked and the ideas come bouncing out of the Treasury as to whom to kick next.
Let no one argue that we are pleading for lower revenue to the Chancellor now. Perhaps some would make a case for lower revenue. There may be a good case for saying that more should be done by cutting Government expenditure and less by trying to take it out by higher revenue. But we have in no way argued for lower revenue this evening. On the contrary, we have said—although for procedural reasons we cannot table amendments to further that aim—that we are in favour of the 10 per cent. rate of VAT. We do not believe that it should ever have been fiddled down to 8 per cent. for electoral manoeuvres last autumn. We have said that if it stayed at 10 per cent. the revenue gained would be far greater than the revenue which will be forthcoming from the 25 per cent. rate. Moreover, it is obvious to anyone who knows anything about industry, wholesaling or retailing, that it would save enormous administrative costs not merely in Whitehall and the Customs and Excise but in every shop at every counter in the High Street.
That is our position. Therefore, we have no hesitation about pressing the case against the 25 per cent. rate. We believe that far from arguing for a lower revenue, our proposals would secure the revenue more fully than the 25 per cent. rate.
As for the arguments for and against the principle of that 25 per cent., the difficulty is that the Treasury believes—I do not know whether the Financial Secretary or the Chancellor believe it—that there is a category of goods which can be called less essential. The difficulty, of course, is that in the real world no such category exists. For some people, some things are essential. For others, other things are

essential. This explains the extraordinary muddle into which the Chancellor and Ministers have had to get in order to explain which is which.
We have had discussions about powered equipment in the kitchen. For those who put up their feet and watch the dishwasher, that is a luxury. But for a working housewife with a family to look after, who has to provide a proper home and a safe and secure background, a washing machine or a dishwasher may be an essential piece of equipment.
As for television, again the Chancellor obviously believes that is less essential. Indeed, in his Budget speech he told us that he had concentrated on less essential items so that the better off, who he said bought more of these goods, particularly of the expensive kind, would bear a larger share of the tax burden. I do not believe that a man who could say that realised at the time—perhaps he did—that 12 million households have rented televisions, including all the poorer, lowest income groups. Those two things are not consistent, yet the Chancellor thought it necessary to say that.
As for repairs and servicing, we shall be returning to that matter in further debates. But again, it is almost incredible that repairs and servicing could be classified as non-essential. One has only to imagine a little how people will be inclined to poke into the back of machinery with screwdrivers to think of the risks.
This tax will fall at random on all sorts of firms quite regardless of whether they are connected with luxury goods. The reason that that is so is that one cannot divide industry between the firms making the luxury items and the rest. Industry is made up of a myriad of individual services, and producers of components and items, some of which will be taxed, some of which will not. Some firm making a component will be told that it is for use in a refrigerator, while others will be told it is for something else and will escape the higher rate.
10.45 p.m.
We are set for exactly the same non-senses as we had with the old favourite SET, which came from the same cloistered world and under which, we were told, the economy could be divided between manufacturing which was good and services which were bad. Now we


are told that clocks are good and radios are bad; cookers are good and kettles are bad; stoves are good and servicing is bad; telephones are good and toasters are bad; cricket bats are good and boats are bad. As an ultimate idiocy, we are even told in one of the schedules that terrestrial telescopes which produce an upright image are good but that astronomical telescopes which produce an inverted image are bad. It is the astronomical telescope that we shall need if we are to look at the inverted and absurd logic of the new rate of tax.
We have had a long debate and it is time to bring together the obvious and overwhelming fact that this 25 per cent. rate has no basis on which to stand. In sum, it is a poor deal for the Revenue with its high administrative costs. It is unjust for the consumer and is bad for the sportsman and the canoeist. It is a tax on the little ships. Above all, it is wickedly damaging to British industry.

It will create a climate of instability and be a major bonus to foreign imports. These are the three reasons why we believe it to be disastrous—a hat trick of reasons, and that is quite an achievement even for this Chancellor and the present Government.

The hon. Member for Sheffield, Attercliffe (Mr. Duffy), in a very honest and frank speech, said that he thought—and he should know—that most of the Labour Party was against this sort of thing. Others of his hon. Friends have tried to support their Front Bench but were obviously inclined his way too. They and the whole Committee will therefore be wise to show what we all really think of this absurd proposal and press the amendment to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 116, Noes 140.

Division No. 209.]
AYES
[10.47 p.m.


Adley, Robert
Howell, David (Guildford)
Ridley, Hon. Nicholas


Arnold, Tom
Hunt, John
Ridsdale, Julian


Atkins, Rt. Hon. H. (Spelthorne)
Irvine, Bryant Godman (Rye)
Roberts, Wyn (Conway)


Bain, Mrs. Margaret
Jenkin, Rt. Hon. P. (Wanst'd &amp; W'df'd)
Sainsbury, Tim


Benyon, W.
Jessel, Toby
Scott-Hopkins, James


Boscawen, Hon. Robert
Kilfedder, James
Shaw, Giles (Pudsey)


Bowden, A. (Brighton, Kemptown)
King, Evelyn (South Dorset)
Shaw, Michael (Scarborough)


Brittan, Leon
Knox, David
Shelton, William (Streatham)


Brotherton, Michael
Langford-Holt, Sir John
Shepherd, Colin


Bryan, Sir Paul
Lawrence, Ivan
Silvester, Fred


Buck, Antony
Lawson, Nigel
Sims, Roger


Budgen, Nick
Lloyd, Ian
Sinclair, Sir George


Carlisle, Mark
MacCormick, Iain
Smith, Dudley (Warwick)


Chalker, Mrs. Lynda
Macfarlane, Neil
Speed, Keith


Churchill, W. S.
MacGregor, John
Spicer, Jim (W Dorset)


Clarke, Kenneth (Rushcliffe)
Marshall, Michael (Arundel)
Stewart, Donald (Western Isles)


Cockcroft, John
Maude, Angus
Stewart, Ian (Hitchin)


Cope, John
Maxwell-Hyslop, Robin
Stradling Thomas, J.


Corrie, John
Mayhew, Patrick
Taylor, R. (Croydon NW)


Costain, A. P.
Moate, Roger
Tebbit, Norman


Crawford, Douglas
Monro, Hector
Temple-Morris, Peter


Crowder, F. P.
Moore, John (Croydon C.)
Thomas, Rt. Hon. P. (Hendon S.)


Dean, Paul (N Somerset)
Morgan, Geraint
Thompson, George


Eden, Rt. Hon. Sir John
Morrison, Charles (Devizes)
Thorpe, Rt. Hon. Jeremy (N Devon)


Fisher, Sir Nigel
Mudd, David
Townsend, Cyril D.


Godber, Rt. Hon. Joseph
Neubert, Michael
Tugendhat, Christopher


Gorst, John
Newton, Tony
Viggers, Peter


Grimond, Rt. Hon. J.
Normanton, Tom
Wakeham, John


Hall, Sir John
Nott, John
Walker-Smith, Rt. Hon. Sir Derek


Hall-Davis, A. G. F.
Onslow, Cranley
Wall, Patrick


Hamilton, Michael (Salisbury)
Oppenheim, Mrs. Sally
Watt, Hamish


Hannam, John
Osborn, John
Weatherill, Bernard


Harrison, Col. Sir Harwood (Eye)
Pardoe, John
Welsh, Andrew


Hayhoe, Barney
Parkinson, Cecil
Wiggin, Jerry


Henderson, Douglas
Penhaligon, David
Wilson, Gordon (Dundee E.)


Heseltine, Michael
Percival, Ian
Winterton, Nicholas


Hicks, Robert
Raison, Timothy



Higgins, Terence L.
Rathbone, Tim
TELLERS FOR THE AYES:


Hordern, Peter
Rees-Davies, W. R.
Mr. Anthony Berry and


Howe, Rt. Hon. Sir Geoffrey
Renton, Rt. Hon. Sir D. (Hunts)
Mr. Spencer Le Marchant.




NOES


Anderson, Donald
Atkinson, Norman
Bidwell, Sydney


Archer, Peter
Barnett, Rt. Hon. Joel (Heywood)
Bishop, E. S.


Armstrong, Ernest
Bates, Alf
Blenkinsop, Arthur


Ashton, Joe
Benn, Rt. Hon. Anthony Wedgwood
Booth, Albert




Bray, Dr. Jeremy
Hoyle, Doug (Nelson)
Parker, John


Brown, Ronald (Hackney S.)
Huckfield, Les
Parry, Robert


Canavan, Dennis
Hughes, Mark (Durham)
Pendry, Tom


Cartwright, John
Hughes, Robert (Aberdeen N.)
Phipps, Dr. Colin


Castle, Rt. Hon. Barbara
Irvine, Rt. Hon. Sir A. (Edge Hill)
Powell, Rt. Hon. J. Enoch


Clemitson, Ivor
Irving, Rt. Hon. S. (Dartford)
Richardson, Miss Jo


Cocks, Michael (Bristol S.)
Janner, Greville
Roberts, Gwilym (Cannock)


Coleman, Donald
Jenkins, Hugh (Putney)
Rodgers, George (Chorley)


Concannon, J. D.
John, Brynmor
Rooker, J. W.


Cook, Robin F. (Edin C.)
Jones, Alec (Rhondda)
Roper, John


Cox, Thomas (Tooting)
Jones, Dan (Burnley)
Ryman John


Cryer, Bob
Judd, Frank
Shaw, Arnold (Ilford South)


Cunningham, G. (Islington S.)
Kerr, Russell
Sheldon, Robert (Ashton-u-Lyne)


Dalyell, Tam
Kilroy-Silk, Robert
Silkin, Rt. Hon. John (Deptford)


Davidson, Arthur
Kinnock, Neil
Silkin, Rt. Hon. S. C. (Dulwich)


Davies, Denzil (Llanelli)
Lamborn, Harry
Silverman, Julius


Davies, Ifor (Gower)
Lamond, James
Skinner, Dennis


Deakins, Eric
Leadbitter, Ted
Snape, Peter


Dormand, J. D.
Lee, John
Spearing, Nigel


Douglas-Mann, Bruce
Lestor, Miss Joan (Eton &amp; Slough)
Spriggs, Leslie


Duffy, A. E. P.
Lipton, Marcus
Stallard, A. W.


Dunn, James A.
Loyden, Eddie
Strauss, Rt. Hon. G. R.


Dunnett, Jack
Lyons Edward (Bradford W.)
Thomas, Ron (Bristol NW)


Dunwoody, Mrs. Gwyneth
MacFarquhar, Roderick
Urwin, T. W.


Edelman, Maurice
Mackenzie, Gregor
Varley, Rt. Hon. Eric G.


Edge, Geoff
Mackintosh, John P.
Wainwright, Edwin (Dearne V.)


Edwards, Robert (Wolv SE)
Maclennan, Robert
Walden, Brian (B'ham. L'dyw'd)


Ellis, John (Brigg &amp; Scun)
Madden, Max
Walker, Terry (Kingswood)


Ellis, Tom (Wrexham)
Magee, Bryan
Watkins, David


Evans, Ioan (Aberdare)
Marks, Kenneth
Watkinson, John


Evans, John (Newton)
Masson, Rt. Hon. Roy
Weetch, Ken


Faulds, Andrew
Maynard, Miss Joan
Weitzman, David


Flannery, Martin
Mendelson, John
Wellbeloved, James


Fletcher, Raymond (Ilkeston)
Millan, Bruce
White, Frank R. (Bury)


Ford, Ben
Molloy, William
Williams, Alan Lee (Hornch'ch)


George, Bruce
Moonman, Eric
Williams, W. T. (Warrington)


Gilbert, Dr. John
Moyle, Roland
Wise, Mrs. Audrey


Hardy, Peter
Mulley, Rt. Hon. Frederick
Woodall, Alec


Harper, Joseph
Murray, Rt. Hon. Ronald King
Woof, Robert


Harrison, Walter (Wakefield)
Newens, Stanley
Young, David (Bolton E.)


Hayman, Mrs. Helene
Ogden, Eric



Heffer, Eric S.
O'Halloran, Michael
TELLERS FOR THE NOES:


Horam, John
Orme, Rt. Hon. Stanley
Mr. David Stoddart and


Howell, Denis (B'ham Sm H.)
Ovenden, John
Mr. Laurie Pavitt.

Question accordingly negatived.

11.0 p.m.

Mrs. Sally Oppenheim: I beg to move Amendment No. 11, in page 13, line 7, leave out 'or services'.
This is a paving amendment to prepare for a more specific amendment to Schedule 7 in Committee or on Report. Our purpose then will be to seek to exclude services such as installation, maintenance and repairs and the replacement of spare parts from the application of higher rates of VAT, particularly in the case of domestic appliances, radios and television sets.
We believe that it is intolerable that hard-pressed consumers who are struggling to make ends meet at a time of unprecedented inflation should have to pay 25 per cent. on these items—VAT not only on new domestic appliances such as radios, electric kettles and irons but also on such luxuries as the maintenance and repair of items such as irons, electric kettles and small domestic appliances that they already have.
For example, if a pensioner who has perhaps arthritic or unsteady hands takes his radio—a very important item to an elderly person living alone—to have a new battery fitted, or an iron to have a new plug fitted, he will have to pay 25 per cent. VAT, apparently, not only on the service but on the plug itself, whereas if he were able to fit such items himself he could buy them at a lower rate in the shop and take them home.
I hope that the Financial Secretary will be able to clarify this point. It is not entirely clear to me that this provision is in the schedule, but in the notice put out by the Commissioners of Customs and Excise it seems clear that these things are not to be excepted where they are supplied in connection with a service, which is itself chargeable at the higher rate. It will be intolerable if elderly people unable to carry out these services for themselves—I must admit that I cannot fit a plug—have to pay additional VAT because they are unable to do so.
If it is so, those who get the crumbs according to the Chancellor's own words are indeed having to pay the bill for those who have snatched the plums—a perfect example of Socialist justice. The whole concept of levying a luxury rate of tax on

repairs and maintenance is fundamentally mistaken and unfair.
I do not accept the Financial Secretary's view that the tax must be levied on repairs if one has it on the supply of goods themselves. In such a situation, the consumers are left with no choice as to whether they have the service if something is in need of repair; they have to have it.
The Chancellor, in levying 25 per cent. VAT on items he considers to be less necessary—something with which we do not agree—is also attempting to reduce demand on these things, but to apply this concept to servicing and maintenance costs is manifestly absurd. Consumers who are trying to avoid having to buy new appliances by keeping those which they already own in good repair are being penalised for doing so, and this will be contrary to what we understand to be his aims.
Whereas it may not be essential to buy a new kettle and refrigerator—and in many cases it may be essential—it is surely essential, at a time when the cost of these and alternative items is greatly increasing, to be able to afford to repair existing equipment. As I am sure the Committee is aware, the cost of servicing and maintenance has risen to a fantastic degree over the past year, and not the least is the element of labour costs. Not surprisingly, many firms find it necessary to charge for travel time by employees carrying out servicing and maintenance. There is widespread concern amongst consumers that the Government should be exacerbating the problem now to the extent of 25 per cent.
Moreover, these tax increases impose not only considerable price increases but also continuing price increases, because servicing is a continuing cost. They are price increases on items which the people who bought them in the first place did not have the slightest idea would involve them in this kind of cost of maintenance. Does the hon. Gentleman think, if the family refrigerator breaks down and a week's food is wasted if it is not repaired, that that, to use the Chancellor's own words again, is less necessary expenditure?
Then there is the additional point made by my right hon. and learned Friend the Member for Surrey, East (Sir G.


Howe), that this is a tax on safety, especially in the servicing of electrical appliances and television.
The Financial Secretary must be aware that many electricity boards will not allow people to buy and fit spare parts to electrical appliances themselves because of the safety aspect. I speak as a vice-president of the Royal Society for the Prevention of Accidents when I assure the Committee that a very high percentage of fires and other accidents in the home—many of them serious and involving deaths—are caused by inadequate wiring and defects in all manner of electrical appliances, particularly in television. These appliances may not be defective in the first place, but if they are older models and have been in use for a long time, they are likely to become defective with time.
The figures put out by the joint fire research organisation in its annual statistics for 1972, which are the latest statistics available, show that there were 1,909 television fires in 1972 and 1,660 faulty electric blanket fires. Many television fires are incendiary explosions, so that they are very serious. Does the Chancellor want to be responsible for adding to the number of those accidents? Many people, faced with having to pay 25 per cent. VAT, if they happen to see a loose wire in their electric blanket will leave that wire loose or fiddle about with it themselves rather than have it properly maintained or repaired by an expert. Fiddling about with the loose wire is even more dangerous than leaving it alone.
As to the strange non-essential concept, of which we have heard since the proposal was made to introduce this 25 per cent. rate of VAT, I remind hon. Members that, in relation to refrigerators and their servicing, the Food Standards Committee, in recommending open date stamping for perishable foods, emphasised that the temperature at which these foods should be stored in transit, in shops and in the home was as important as the date stamping. There is a considerable health risk if foods, especially cooked foods, are stored at home at a temperature which is not sufficiently low. If 25 per cent. VAT has to be paid on repairs so as to keep refrigerators in order—and refrigerator repairs are very expensive because

the parts are costly—many people will not be able to have these repairs carried out because their money will have run out.
Above all, our overwhelming objections to the imposition of this level of taxation on servicing and spare parts is that it will add unavoidably to the cost of living of nearly every family and every pensioner in the country, while the return is likely to be very small. Neither the Chancellor nor the Treasury has any idea how much the return on servicing is likely to be, as the Financial Secretary confirmed to me in a Written Answer on 12th May. Onerous as this tax will be on individuals, it will form a very small proportion of the £175 million to be raised in higher rate VAT on domestic appliances, radios, and television sets. That amount could be offset easily by economies in other directions.
As a number of my right hon. and hon. Friends said in a previous debate, multi-rate VAT inevitably brings in its wake not only intolerable pressures on shopkeepers, large and small, but also the ridiculous anomalies which have been pointed out before, which I have described tonight, and which our amendment seeks to remove. This is a typically insensitive measure of the kind that we have come to expect from this Government. It is just part of the price that is being paid by consumers and taxpayers for pre-election bribery and post-election Bennery, and for the fact that the Government have failed to bring inflation under control.

Mr. Bruce Douglas-Mann: Although I do not wish to associate myself with the motive expressed in the speech of the hon. Member for Gloucester (Mrs. Oppenheim), there were ingredients of good sense in what she said.
A little while ago the Labour Party published a document called "Politics of the Environment", in which we discussed the question of bringing in taxes which would encourage the retention of goods rather than their replacement. We toyed with the concept of a time-graded car tax, for example. A tax which positively discriminates against repairs is economically undesirable and is disadvantageous as regards the conservation of resources.
We already have a great tendency to scrap rather than to repair or adequately to maintain goods. There is a great disincentive for many retailers to provide much needed repair services for electrical appliances. The hon. Member for Gloucester rightly referred to the dangers of leaving goods unrepaired. I cannot say that I am acutely worried about that, although there was an element of truth in what she said about the old lady trying to repair her electric blanket. However, there is a serious danger that shops which provide repair services will find an inadequate demand for such services in future and it will not be worth their while keeping skilled repair men.
The object of the measures in the Budget is to reduce the demand for some of the articles that we are consuming. But this proposal will go against that. It will encourage demand. Although that may be beneficial in some ways, it will be highly disadvantageous in others.
I urge my hon. Friend to reconsider whether it would be practicable to exclude the item on services, particularly repair and maintenance services, from the clause. I appreciate that it is administratively complicated whichever way we do it. But as we are to have the complication of the multi-rate VAT, I do not see why it is impracticable to distinguish between the goods and the services provided. It will be a burden for shops whatever happens. I suggest that it is not impracticable to exclude services from the clause. I hope that, on reflection, my hon. Friend will find that it is practicable. If not, we shall go completely contrary to the purpose of the Budget regarding both the economic situation and the use of resources.

Mr. John MacGregor: I intervene only briefly to support the amendment.
When I first heard that the 25 per cent. VAT was to be attached to services, I reacted with almost profound disbelief.
The speech by the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) was typical of nearly all that we have heard from Government supporters today. First, they say that they wish to dissociate themselves from our general approach, then sotto voce that they agree with the general arguments, and then

clearly express their profound concern about the 25 per cent. VAT.
I reacted with profound disbelief for five general reasons. First, I cannot believe that the revenue from the 25 per cent. VAT in relation to the total revenue will be very high. The Financial Secretary said that he could not give an estimate. If it is possible to give an estimate for the total revenue from the 25 per cent. VAT proposal, it must be possible to give some idea of what is expected from the service charge. I cannot believe that it is a large element in the total revenue raised.
Secondly, as has been said, this tax will apply to many articles which are not luxuries but essentials in the home. We are talking about a situation in which many goods will go out of service because people will not be able to afford the new charges.
Thirdly, I turn to the safety aspect. It is significant that not only the Opposition, but many consumer organisations are concerned about this matter. I refer to official bodies like the consultative councils in the electricity industry.
I should like to quote from a statement made after a meeting of the Eastern Electricity Consultative Council considering the application of the 25 per cent. VAT to repair services. The council stated:
It was felt that many people would be forced to delay the repair of unsafe appliances because of the high cost, or attempt unskilled repairs themselves.
The Council went on to say:
In the Committee's view, the added risks to life were totally unacceptable".
11.15 p.m.
Fourthly, there is the point that this will bear particularly hardly on those such as old age pensioners and others on low incomes whose goods of this sort have been in operation for a long time and require repairs. Pensioners will neither have the skill nor the opportunity to repair them themselves.
Again to come to what the Electricity Consultative Council said on this point:
As the Council is well aware, repair charges are already a serious financial burden on old age pensioners and other consumers with low incomes. For example, Eastern Electricity operated a minimum charge for service calls to customers' homes. At 8 per cent. VAT this


minimum charge worked out at £4·48. At 25 per cent. VAT the charge would increase to £5·19, a 16 per cent. overall increase in the minimum charge.
Bearing in mind that further increases in service charge would result from recent wage negotiations … the increase in VAT would make the burden intolerable.
It would not be possible within the range of pensions and low fixed incomes to meet this sort of charge, a large part of which is due to VAT.
The final point, which concerns me most of all, is the effect on service industries. It will have one of two results. It will put a lot of people out of business—and I have already met many self-employed people suffering from increases in national insurance contribution rates who feel that the demand for their services will so diminish that they will have to get out of the business they are in, such as electrical goods and gardening machinery, and find employment elsewhere. The effect will be that it will not be easy to find someone to do the servicing.
The second alternative is that it is bound to lead to widescale evasion by the consumer and by the supplier of services. I have heard many people refer to the extreme likelihood of that. It would be wrong to ignore the fact that it will go on. People will produce invoices and claim that they are for servicing to goods which attract only the 8 per cent. rate, or they will not produce invoices at all.
It is the magnitude of the increase from 8 per cent. to 25 per cent. which will cause the evasion and make the consumer and the supplier feel that it is right to do it because it is the only way the supplier can stay in existence and the only way the consumer can get the repair done.
For all these reasons, the Government would be right to think again about the inclusion of services. If they cannot do anything about it this evening, I hope that we shall press it in Standing Committee.

Mr. Ronald Brown: I intervene because I take great exception to this item. As I look at the Treasury Bench, I see no engineer present to inquire into an area where one would expect the expertise of an engineer to be and to tell the Government how ridiculous they are in stopping

people from having their equipment serviced.
The Treasury do not seem keen to stop Japanese equipment coming in, or equipment from other countries, but they are well aware that the electrical standard of that equipment is often not in accordance with the standards of equipment in this country. Having accepted that, it follows that people who have, wrongly in my view, purchased that equipment, will discover that it is not in accordance with the standards of safety in this country and they will be liable to pay a 25 per cent. surcharge to have it put right.
The Minister cannot possibly argue a case for it. It is no good producing the argument that because we have put the charge on the new equipment, it is only fair to put it on the charge for servicing as well. That is not an answer but an excuse. I am not sure that they were right in the first place, but if they were, they should not then penalise everybody else, particularly in ways affecting safety, to justify their first action.
Secondly, the Treasury is aware that television set cabinets are being made in dangerous material, rigid polyurethane foam. I have been campaigning against polyurethane foam for many years. Because of its use in cabinets, some sets are virtually time bombs in the home.
If the Government are to dissuade people from having their equipment properly serviced, they will have an enormous problem on their hands. It will be no use my hon. Friend the Financial Secretary wringing his hands and saying "I didn't know. Nobody told me." We are telling him tonight. By stopping people from having their equipment serviced he is making it as sure as night follows day that women and children will be burnt to death, because equipment catches fire.
My hon. Friend frowns. I beg him to understand what he is doing. This is not a matter of words, of playing accountancy games. He is playing with people's lives. He is saying "I shall surcharge you on your equipment." The ordinary person who cannot afford that surcharge will do the next best thing. He will go to someone whose normal job could be just anything at all and who offers to do the work cheaply.
My hon. Friend is breaking down the results of years of work that many of us


have done to dissuade people from using unqualified service staff. Is he taking us back many years, to encourage just anybody to take on electrical work, advertising in the newsagent's window "Electrical repairs done. No VAT"? This vast impost has no relationship to the service.
This is pure bureaucracy. It smells of the civil servants saying "Minister, because we have done it here we must do it there. Fob them off with a story about equality. It is difficult to draw the line, and therefore we should cover it all." That will not satisfy me. This is much too serious a matter.
I hope that my hon. Friend will reconsider the matter. I can understand that he must take advice, but I ask him to tell us that he will ensure that we place the safety of our people uppermost.

Mr. Patrick Mayhew: The argument about safety, so eloquently put by the hon. Member for Hackney, South and Shoreditch (Mr. Brown) and other hon. Members on both sides of the Committee, is overwhelming. The resources argument and the after-sales argument are also overwhelming.
I want to say a few words about the social justice side. It is unarguable that those who most depend on television sets are the old, the sick and the disabled. It is extraordinary for this Government of all Governments to seek to penalise them by putting a 25 per cent. rate of VAT on the cost of the repair of their sets. The old, the sick, the disabled and the poor are the very people who can least afford to pay the increase. These sections of our population will inevitably feel a sense of injustice that the 25 per cent. surcharge is levied on them, as a kind of punishment, as part of the Government's anti-inflation measures, when they deserve least of all to be punished for any contribution towards inflation.
Many people think that if they have made a contract to hire a television set for a fixed time it is unfair if half-way through the term of the contract they have to pay more—in other words, if the terms are made more severe. It may not stand up in a lawyer's close analysis, but that is something that ordinary people feel, and I share their feeling.
It is odd that a Government who were elected upon what they called the social contract, who said in their manifesto that they believed that people would rise to difficult challenges if there were an underlying sense of fairness, should resort to this measure which will cause such hardship to those who are least in a position to cope with it.
I hope very much that the Government will pay attention to what I call the social justice argument as well as to the arguments relating to safety, to the use of resources and to after-sales that we have heard tonight. This is a totally indefensible measure on each of those four heads, and I trust that the Government will have the humility to remove it.

Dr. Gilbert: May I first welcome the hon. Member for Gloucester (Mrs. Oppenheim) to the Opposition Front Bench on a Finance Bill debate. It is a pleasant novelty for those who spend much of their time engaged in this activity. I thank the hon. Lady for the reasonable way in which she put the case about which she feels so strongly, but I shall probably have to disappoint her and my hon. Friends.
I understand that there are strong feelings here. Whenever questions of safety arise it is right and proper that people should feel strongly on the subject, but I think that possibly the concerns expressed by the hon. Lady and others are somewhat exaggerated.
There are serious problems and anomalies here. First, if the servicing that was comprised in an overall rental contract was charged at 25 per cent., whereas servicing under a maintenance contract for people who owned their own sets was charged at 8 per cent. that would be an anomaly, and I am sure that I carry the hon. Lady with me in that.
Then we come to whether parts should be charged at a lower rate than the goods themselves, and whether servicing and parts should be at different rates. On the question of parts being charged at a lower rate than the complete unit, I am sure the hon. Lady needs no reminding that it was problems of this sort which led to some of the greatest anomalies which were properly spotlighted by the late Sir Gerald Nabarro, whose name has been invoked more than once during the debate.
When parts are treated at a different rate from the unit itself, immediately one sees the springing up of do-it-yourself kits, which were a feature of the old purchase tax system. If parts were chargeable at only 8 per cent. whereas television or radio sets were charged at 25 per cent. we should rightly face floods of amendments from Tory Members pointing out how the whole tax was riddled with loopholes and anomalies.

Mrs. Sally Oppenheim: Is the hon. Gentleman suggesting that people will start building their own television sets if parts are lower rated?

Dr. Gilbert: People started building their own radio sets when the purchase tax rates were different. They might end up by building their own television sets for all I know. This is precisely the sort of thing that used to happen under the purchase tax régime when parts were taxed separately.

Sir Paul Bryan: How many people built their own sets?

Dr. Gilbert: I have not the faintest idea, but I am sure the hon. Gentleman would be in the van pointing out the anomalies of a tax system which did not tax parts at the same rate as the complete unit.
Then we come to whether servicing, labour and material costs should be treated separately. I have to say to the hon. Lady—and she has great experience of dealing with small traders—that if we were to treat servicing, labour and material costs separately this would present enormous complications for the small trader and the small repair man.
I take issue with the hon. Member for Norfolk, South (Mr. MacGregor). I cannot imagine a greater incentive to tax evasion than a situation where, with respect to the same piece of work, the part is rated at 25 per cent. and the labour cost at 8 per cent. It would be impossible. There would be a wide open invitation to people to weight the charge one way or another where the two elements of the operation were taxed at different rates. The hon. Gentleman, who is reasonable in these matters, must recognise that.
Therefore, in terms not only of efficiency of administration of the tax but

of the equity of the system and the efficiency of administration for the retailer and the small service man, I am quite clear that we are right to tax both the material and the labour costs of servicing it at the same rate as the cost of the item to which the servicing relates.
My hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) is, of course, in general terms, if I may so put it, on a very good point about the need for society at large to encourage repair rather than replacement of obsolescent equipment. I do not dispute the general principle he was putting forward. I would, however, say to him that that general principle, like all general principles, is subject to certain reservations. I would have thought that the question whether one should repair or replace ageing electrical equipment is a particular case where the balance might come down in favour of replacement rather than repair.
I was grateful to my hon. Friend for what he said about the danger of the old lady doing repairs on her electric blanket herself. That brings me to the point—

Mr. Ronald Brown: To arrive at the decision which my hon. Friend has just postulated, a person would have to pay 25 per cent. VAT to get the advice before finding out whether the item was worth replacing or being repaired.

Dr. Gilbert: I am not an engineer, but I do not think that most people charge that much for advice whether an ordinary piece of domestic equipment should be replaced or repaired.
Generally speaking, people who contemplate repairing their own electrical domestic appliances will do it whether there is an 8 per cent. or a 25 per cent. rate. There are people who either repair their own appliances or they do not. I simply do not believe that an individual who would normally go automatically to get his equipment serviced, as I would, for example, and as I imagine most hon. Members would, by somebody who knew how to do it would suddenly try to do it himself because he found that there was a modest increase in the charge. He would be out of his mind to interfere with electrical equipment in that way if any element of it was dangerous.
Most servicings, I am sure my hon. Friend will agree, relate to breakdowns of electrical equipment—of refrigerators or washing machines, for example—rather than to a situation in which there is an element of safety at stake.
My hon. Friend referred to certain types of television cabinet as being unsafe and called them, I believe, potential time bombs. I bow to his great knowledge in these matters as I know of his long experience in the furniture trade, but I understand, though I am obviously subject to correction, that where there is an inherently unstable or unsafe situation of this sort with a television set which might go up in flames, particularly if it is left on all night, which is often the circumstance which brings about a danger of that sort, no amount of servicing will protect a person from a risk of that sort if he leaves the television set on all night and, therefore, it becomes overheated.
If my hon. Friend made a case for saying that we should license the repairers of electrical equipment to ensure that people do not fall into the hands of unqualified handymen dealing with electrical equipment, just as people should not fall into the hands of unqualified doctors and dentists, that would be another matter and he might well have a strong case to make on those lines. But that is not a matter for which I have responsibility or which I can properly discuss now. These may be the lines on which it would be preferable for us to move. In all sincerity, I say to my hon. Friend that I think that these fears about safety are exaggerated. If we were not to have the same level of tax there would be far more anomalies, far greater incentives to evasion, and far more difficulties for the trader and for Customs and Excise.

Mr. Douglas-Mann: I would be grateful if my friend would clarify his case. Is he saying that the only valid reason for excluding the labour costs from this level of tax is that it would be difficult for the small trader to administer it? He has said that many of our fears are groundless. That may or may not be so. But his only argument adduced to support his view that what we are proposing is not practicable is that it would be difficult for the small trader to dis-

tinguish between the rate of tax on parts and the rate of tax on labour. Has he ever taken his car to be repaired and had petrol put into it and looked at the bill, showing VAT at 8 per cent. on the work done and 25 per cent. on the petrol put in? Can he clarify whether there is any argument other than administrative convenience against the separation of labour costs from the costs of parts?

Dr. Gilbert: I am sorry if I did not make myself clear. That is only part of the case. Of course there will be greater administrative problems for the small handyman and the repair shop. What I hoped I made clear to the Committee, in particular reference to the remarks of the hon. Member for Norfolk, South, is that, if one did not have the supply of materials and of labour in any repair job at the same rate of tax, that would constitute a direct incentive to tax evasion and fiddling.

Mr. Newton: I should like to make two brief comments. First, it is quite clear from what the Financial Secretary has said that he is not living in the real world at all. He appears to be unaware that it now costs about £5 to get a man to the doorstep just for advice on a piece of equipment, let alone putting in a part or doing anything about it—[HON. MEMBERS: "Nonsense".] Government supports say "Nonsense", but that is, roughly speaking, the official charge by the electricity boards, the gas boards and the telephone people. One can get the little man whose name appears on the newsagent's board, and who may or may not know what he is doing, for less than £5. All the pressures that exist already will be markedly increased. People will go for the fly-by-night operator.
Anyone in the Metropolitan area who has been concerned with servicing work of any kind over the last few years will know that there has been a massive growth in the use of the services of the little man who, in effect, says, "Pay me cash and it will be cheaper—you will avoid your tax." All this will be exaggerated, and it will have dangerous side effects. If the Financial Secretary does not accept that, I believe he is living in a dream world.
He said at the beginning of his speech that the fears about safety were exaggerated. He then gave no single argument


to support that statement. The whole of the rest of his speech was couched in terms of administrative anomaly.
My conclusion from listening to him was that there would be administrative problems but that what he provided was a convincing argument against the whole notion of a 25 per cent. VAT rate. If these dangerous aspects of the tax cannot be separated from the rest of it and there is no argument against points such as those referred to by the hon. Member for Hackney, South and Shoreditch, the very basis of the argument advanced by the Government is defeated.
We have listened to a very inadequate reply from the Financial Secretary which did not deal with the main arguments and confirmed the fears which many hon. Members have expressed.

Mr. Giles Shaw: The Committee has had an extremely interesting and informative debate. I am grateful to those of my colleagues who normally handle matters touching on Finance Bills for allowing those of us involved in the Consumer Affairs Group to draw attention to this amendment and to argue it before the Committee. Our main reason for wishing to do that concerns, first, the area of safety, secondly, the area of social unfairness, and, thirdly, the area of servicing, its availability and its cost.
The contributions of hon. Members have indicated their widespread concern that, with the application of this rate of tax to servicing, there will be a disincentive—I put it no higher than that—to continue the same level of servicing and to go as frequently, if at all.
My hon. Friend the Member for Braintree (Mr. Newton) was right to take the Financial Secretary a little to task for the apparent casual way in which he considered some of the fears expressed to be exaggerated. We know that there are very many old people who find it difficult to handle electrical appliances and who will now be deterred from seeking the professional service. The sum of £5 quoted by my hon. Friend appeared to create astonishment among Government supporters. But I can confirm that that is the charge made for a call from a representative of an electricity or gas board. There is the prospect of infrequency of calling and of maintenance, and a positive

increase in the danger of appliances. The hon. Member for Hackney, South and Shoreditch (Mr. Brown) drew attention to the problem in his own way. We feel strongly that there is a case to be answered, and we have not had the answer tonight.
We are equally aware of the problems to which the Financial Secretary draws attention continually about anomalies. He thinks that it would be difficult to make a separation of the rate of tax on components or the servicing element and the rate applied when the article is sold in its entirety. There will be anomalies as soon as we move into a multi-rate VAT system. In a sense, we are not moving into one. We have one already. We have a zero rate and a standard rate, and many shops handle goods covered by both categories.
The least excusable anomaly is that we have in the sale and maintenance of electrical appliances very important standards to be maintained. It does not seem to be an anomaly worth calling much if someone says, "Very well. I would rather have the 8 per cent. of the 8 per cent. appliance and the 25 per cent. of the 25 per cent. appliance", when we want to encourage the maintenance of a high standard of electrical equipment and the long life of appliances, which are expensive in themselves.
Any shop keeper dealing in the maintenance and sale of electrical appliances already has a vast range of materials which will be at different rates.
To make a brief constituency point, a company in my constituency manufactures components for the caravan trade, already a subject of great anxiety among hon. Members earlier. It makes window frames, windows and doors, and, although a large proportion of its output goes to static homes, mobile classrooms, contractors' huts, and so on, it has been asked by Customs and Excise to charge a flat 25 per cent. rate on all its windows and doors. I suggest that that is a major anomaly. The correct tax should be assessed according to the destination of the goods. I am sure that the Financial Secretary would wish that to happen.
11.45 p.m.
However, in relation to safety we have to adopt certain standards and to abide by them. We have already made it clear


that there are grave consumer problems here. There are questions of consumer protection, of cost and of availability. The availability of servicing will be put at risk. The Financial Secretary may say that it might lead to the setting up of "do-it-yourself" procedures if he produced a variable in the rate of tax for servicing. That would be a small consequence if it resulted in higher standards of maintenance of appliances and in greater consumer satisfaction.
We feel that this is a tax on safety and one which will have a disproportionate effect on people for very little revenue. No comment has been made by the Financial Secretary on what sums would be involved. My hon. Friend the Member for Gloucester (Mrs. Oppenheim) sought to find out, and of course, at that point the figures were not available.

Dr. Gilbert: I apologise to the hon. Gentleman. I do have a figure. The total revenue in relation to labour and materials that we calculate for servicing of the higher rated articles would be about £30 million a year.

Mr. Shaw: I am grateful for that information. No doubt we shall set that alongside the total income from the VAT rate the hon. Gentleman is seeking to levy and draw our own conclusion whether that is a relatively small sum to be put at risk if it results in a proper handling of equipment and a particularly high standard of safety.
Just in case the Financial Secretary is getting worried about the comments that have been made from both sides of the Chamber, I want to make it clear that we shall not be pressing this amendment to a Division. However, we are taking that view simply because we are very confident that when it comes to handling this problem in Standing Committee, point by point and vote by vote, we shall endeavour to put right what we believe to be an unjustified anomaly in the proposals for VAT.
I conclude by drawing attention to the schedule and pointing out that the unfortunate trader dealing with articles in which components are involved will have an absolute nightmare in determining whether a plug he sells is to be used by a person for an oven, in which case it is

an 8 per cent. article, or used by a person for a washer, perhaps, and thus as a 25 per cent article. The same plug used for different purposes will be liable to different rates.
The anomalies exist, as we knew they would. The greatest problem behind this amendment is to try to ensure that a high standard of safety is maintained, that servicing and its availability continue and, above all, that the consumer gets full and fair satisfaction.
With the agreement of the Committee, we would propose to withdraw the amendment, but we look forward with some confidence to voting this through in Standing Committee.

Mrs. Sally Oppenheim: I beg to ask leave to withdraw the amendment.

The Second Deputy Chairman: Is it the Committee's pleasure that the amendment be withdrawn?

Mr. Ronald Brown: No.

Amendment negatived

Dr. Gilbert: I beg to move, Amendment No. 16, in page 13, line 13, leave out 'shall' and insert 'may'.

The Second Deputy Chairman: With this we may discuss Government Amendment No. 17.

Dr. Gilbert: These two Government amendments are complementary in their effect. Their purpose is to give greater flexibility in the use of the VAT regulator power. I think they are self-explanatory. Unless hon. Members wish me to dilate upon them, I think I can commend them to the Committee without further ado.

Amendment agreed to.

Amendment made: No. 17, in page 13, line 14, at end insert
'or to one only of them, and an order applying to both may make the same or different provision in respect of each'.—[Dr. Gilbert.]

Mr. MacGregor: I beg to move Amendment No. 19, in page 13, line 14, at end insert
'except that the higher rate shall not apply to existing contracts of hire'.

The Second Deputy Chairman: With it we shall also discuss Amendment No. 54, in page 13, line 37, at end add—
'(9) This section shall not have effect in relation to a television set supplied on hire


for a period beginning before May 1975 and continuing after April 1975'.

Mr. MacGregor: These amendments are markers for debates we intend to have on Schedule 7 when the Bill reaches Standing Committee. We wish to discuss them now, however, in view of the extremely strong feeling which exists over this aspect of the 25 per cent. VAT charge among consumers, the retail and rental trade and the television manufacturing industry.
Many of the effects of the increase on rented televisions are similar to those often described in other contexts in the earlier debates today. There is, however, an additional factor of retrospection. Very large numbers of people are involved here. About 12 million sets in this country, about two thirds of the total, are rented as opposed to being on hire purchase or being bought. It is the 12 million with which the amendments are concerned.
The amendments seek to remove from the 25 per cent. charge those sets which are, in the case of the first amendment, already on existing contracts of hire. In the second amendment a specific date is mentioned. The second point concerning the 12 million rentals is that by and large—although one cannot generalise—people who rent television sets tend to come from the lower income groups. This fact was highlighted by the events in that extraordinary period between the Budget Statement and 1st May, from which date the increase to 25 per cent. applied. Those who could see the significance of having to move up to a 25 per cent. rate on rental knew that if they could buy their sets before 1st May they could do so at the 8 per cent. rate. The people who could afford to buy did so leaving the poorer sections still on rental. This, therefore, is now a particular charge on the poorer sections of the community, in many cases on the very poorest.
One point which has cropped up consistently in our debates concerns the magnitude of the increase. It is not as though we are talking about an increase from 8 per cent. to, say, 12 per cent. With the tax going up to 25 per cent. the extra rental becomes a significant element in the household budgets of many people. The increase for a black and white set is about 50p a month, and

for colour the rise will be £1·40 per month or more. Those who have had substantial wage increases over the last year, keeping them well ahead of the rise in the cost of living, will not regard that increase as being particularly significant. There are many people, however—and I am thinking of pensioners and those who have not benefited from substantial pay rises—who will find this extra charge very difficult to bear since all the time their other living costs are rising. I have received representations from such people.
There is then the retrospective element. It is retrospective in the sense that most of the contracts, and all the contracts to which the amendments refer, were entered into before the Chancellor's Budget Statement. Those who took out those contracts thought that for the period of hire they would pay a clear and fixed rate. In the middle of the term, however, the Chancellor has increased the tax. This factor has caused total confusion and great bitterness among people renting television sets.
On a wider approach, the impact of the increase also affects the whole television industry. If we could get the Government to accept the amendments the industry would be spared the severe impact of the increase. Take the case of the retail and rental industry. About 80,000 people are employed in it. The industry believes that there will be significant redundancies if something like our amendments is not accepted.
Earlier this evening the Financial Secretary said that the Chancellor had done much to try to help retail pharmacists and people of that sort and that he had concentrated 25 per cent. VAT on certain groups. The point that has been missed is that by putting the 25 per cent. on special groups the right hon. Gentleman is adversely hitting the specialist shops. He is singling out for special treatment not only the electrical goods shops but shops which specialise in television rentals or in the sale of television sets and associated equipment.
Yesterday I had a long conversation with a shopkeeper about his position. He feels that he is almost certain to go out of business. I am sure that his situation is mirrored in many cases elsewhere. The extra charge on his customers comes


on top of the extra costs that he is having to bear in higher rates, rents and everything else over the coming year.
In the short period since 1st May—admittedly it is a short period and it is difficult to say exactly what the impact will be—that shopkeeper has had to incur a bill of £200 to circularise all his customers about the increased charge. That bill is one which he finds difficult to bear at present. His turnover on television rentals is down almost 50 per cent. Already a trickle—and it is a significant trickle—of television sets are being returned. Those who have contracts feel that they cannot meet the extra charge. My shopkeeper is wondering what he will do with the televisions that will be left on the shelf as they are returned to him.
Equally, he has had no sales of tape recorders or audio equipment since 1st May. That will also have an effect on his turnover. He believes that he could easily have absorbed a 2 per cent. increase in VAT on television rentals and on everything else, but the 25 per cent. will probably be too much for him to bear and he will go out of business. If he does not go out of business he will be left with a great deal of stock.
That is when the impact is felt by the manufacturer. I happen to have a television component manufacturer in my constituency. Since the 25 per cent. he has had to declare 25 per cent. of his staff redundant. In nearby constituencies he has had to close down two factories, both employing 140 people. That is in an area where there is little other employment. Again we see effects of the sort we were talking about earlier on industries and employment and in special pockets both industrially and geographically.
I understand that a working party in the electrical "little Neddy" is investigating the effects of the 25 per cent. and that it will report by 30th May. I hope that the report will be made public and that we shall be able to discuss it in Committee.
I believe that the amendment is justified because it removes the retrospective element which has caused such bitterness. It is justified because this area of VAT bears most heavily on the less-well-off sections of the community. It is justified

because it will help to keep in existence those parts of the rental and retail trade which are now worrying very much about their future. It is justified because it will have a follow-through effect on the television manufacturing industry.
The only issue that gave me cause to wonder whether my arguments were sound was when I saw this morning Early-Day Motion No. 477 in the name of the hon. Member for Bolsover (Mr. Skinner) and some of his hon. Friends, including the hon. Member for Keighley (Mr. Cryer). I was most surprised to find that the hon. Member for Bolsover and I were in agreement. We shall not press the amendment to a vote this evening, but I hope that we shall do so in Committee.

12 midnight

Mr. Bob Cryer: I thank the hon. Member for Norfolk, South (Mr. MacGregor) for giving us the opportunity to discuss the amendment. As he said, several of my hon. Friends and I have tabled an Early-Day Motion. That has been done in response to letters which we have received. They have been written in crabbed style on tatty pieces of paper and they come from pensioners who are impoverished, not from people in the upper income bracket who write on scented notepaper.
Many of the letters have been to the effect that the 25 per cent. VAT on television rental is unjust. One such letter reads:
As my contract for TV rental was entered into before 1st April 1973, before the introduction of VAT, the recent increase of the VAT rate does not apply and therefore my rental payments will be as laid down in the agreement.
That is what the writer of the letter expects. It is a different matter if a person enters into a new contract. It is fair in that case that the increased tax should apply because both parties are aware of the situation at the time.
It is unarguable that people with little money and low incomes rent rather than purchase a television set. There was a gap between the Budget announcement and the application of the new rate of tax, and people with a bit of brass in their pockets were able to pay rental for two or three years ahead. Will they be required to pay the extra VAT on that money? If not, it appears that people


who are in a better financial position will be let off, and the people who cannot afford to pay rent for two or three years ahead will have to bear a more onerous tax burden.
Any indirect tax is unfair and anomalous. The people with low incomes pay a far larger share. VAT is a Common Market tax. If we stay in the Common Market we shall have to pay more VAT because the Commissioners will want to increase their income.
Another letter I have received reads as follows:
I am writing in protest against the rise in television rents. After paying for seven years I do not think it is fair to put up the rents as we have already paid for the set and being pensioners we can ill afford to pay any extra.
Radio Rentals Limited has made representations and ordinary people have made representations too, including members of the Union of Post Office Workers to whom I spoke at a branch meeting last Sunday. I spoke principally about the Common Market. Like sensible trade unionists, they agreed that it was not in the interests of the trade union movement for us to stay in the Common Market. They accepted my argument completely and they will vote "No", as will the majority of people. They also objected to the 25 per cent. VAT on television rentals, especially coming from a Labour Government.
Television is a very important source of entertainment for millions of people. In many houses which are not particularly well-furnished or decorated there is a television set in the corner. One might criticise people for their values, but for many the television set is a means of communication with the outside world. It is no longer a luxury but part of the civilised standards of communication and entertainment that we accept today.
Every hon. Member rejects television only if he makes a conscious effort to do so. We all accept it as part of our life. Will my hon. Friend consider reviewing the position so that some alleviation can be made in Standing Committee, at least for existing contracts? This matter is not perhaps of overwhelming importance, but it is slightly nettling to millions of people who support Labour in election after election. They did not expect such a nettling little injustice to occur. My hon. Friend

should recognise the great injustice and remove the 25 per cent. at least on existing television rentals.

Sir John Eden: My hon. Friend the Member for Norfolk, South (Mr. MacGregor) was right to emphasise that it is the magnitude of the increase which has caused such widespread injury and hurt to the people who rent sets. The size of the jump has come as a great shock to them.
My hon. Friend said that the number of people returning television sets is already a trickle. That may be so elsewhere, but in my constituency it looks as thought the trickle has gathered considerably more momentum, and I fear that the tendency will spread to other parts of the country.
There is a firm in my constituency called Supertel, which rents out a number of sets in the area. It has sent me copies of some of the letters it has received. I will not read them all but will give one or two as examples to bear out what the hon. Member for Keighley (Mr. Cryer) said.
The first letter says:
We find now we cannot afford to keep the rental up now with this VAT Price on it.
The second says:
We have always been pleased with the television and it is only the new huge VAT addition which prices the rental of your television out of all reason.
The third says:
I am sorry but will you please collect your colour television set which I rent from you, because with the rentals going up we cannot now afford it on our OAP.
The fourth says:
The extra 25% added value tax would, in any case, put the rental beyond her means.
These are illustrative of the fact that people are being adversely affected to the point where they are being caused to hand back the sets they have been renting.
Earlier, I referred to the sense of injustice felt by those who entered into agreements at what has overtaken them. A letter written by one of my constituents to Radio Rentals reads:
In view of the fact that I signed my rental agreement several years ago, I wish to query that you have a legal right to raise my monthly payments because of the reasons stated.


To clarify the position—would you kindly send me a copy of my agreement, clearly indicating the section on the agreement, which gives you this right?
Many hon. Members have been in the habit of making representations to successive Ministers responsible for posts and telecommunications—of which I was one—and now to the Minister in the Home Office who is responsible for the matter to abolish or reduce the amount that is paid by old-age pensioners for television licences. That case has been made strongly by hon. Members from both sides, especially by Government backbench supporters.
A strongly felt and compassionate case was made out that the television set was of great significance and importance, especially to the poorer sections of the community and to people living on the it own. That is the reality behind the case that is being made today. I am not trying to pick out one section of the community and suggest that they alone have been hard hit. That is not so. The step to be taken by the Government is unjust in any event. Many people are now having to return their sets because of the incidence of this higher VAT charge.
I hope that the Financial Secretary will say why it has been necessary to impose a 25 per cent. VAT rate on rental charges, why the rental charges could not have been excluded, especially where agreements were entered into before the Budget, and why he could not have restricted the increased VAT rate to rental agreements entered into from the time of the Budget onwards.
The firm to which I referred is feeling aggrieved by the way in which the VAT increase has been handled. It has written a letter to the Chancellor of the Exchequer expressing anger at and contempt for these proposals. Its feelings are summarised in one sentence, which reads:
We are, however, infinitely more concerned with the effect of the ever-increasing legislation, much of it petty and unnecessary, fiscal control, discriminatory taxation and political denigration upon those engaged in the commercial life of our country.
Those are strongly-held feelings. People are fed up with the way they are having to shoulder ever-increasing burdens largely because of the mismanagement of the economic affairs of this country by the Government.

Mr. Nigel Spearing: I support what was said by my hon. Friend the Member for Keighley (Mr. Cryer).
The fact that the same views have come from both sides of the Committee shows that this is not a political party matter. It is one of those matters which come within the realm of good government. All hon. Members are concerned with good government, regardless of the political views they hold. I am concerned at the intensity of the reaction the proposal has evoked from my constituents.
12.15 a.m.
I have had many letters on similar lines to those read by my hon. Friend the Member for Keighley and hon. Gentlemen opposite. This increase, which literally goes into every home, hits at an item which is not generally thought of as taxable.
What I think hurts more than anything is the rental agreement being put up by an announcement from the Dispatch Box and ordinary people being unable to do anything about it. This is felt particularly in areas which support the Government in their general policies.
There is considerable resentment about this matter. I have had many letters on the subject. Although in business there is always a risk of extra taxation contracts entered into particularly by old-age pensioners are not generally thought of as being subject to Exchequer whims and fancies. There is tremendous resentment at the fact that a contract of the type for which people budget several weeks ahead should be put up by 25 per cent., that being a contract for an item which, rightly or wrongly, is regarded as something to do with household consumption.
I put it to my hon. Friend that, in view of the way that this proposal has been carried out and the resentment which has been caused throughout the country, particularly in areas which give strong support to the Government, he should consider the matter again. There is great resentment not only at the tax but at the way that it has been proposed.
I am sure that hon. Members on both sides will agree with me that, with the changes which modern life brings, this sort of measure is confusing particularly


for the elderly and, indeed, for some of us who are not so old. This kind of proposal causes resentment, particularly among those who have to fork out additional expenditure on rentals, not only against the party in power, but against the total machinery of government because of the apparently arbitrary selection of the tax by the Treasury in Whitehall.
I hope, therefore, that when my hon. Friend considers this matter at a later stage he will bear in mind that this tax has caused great resentment in the country, particularly because of its effect upon rental contracts. People tend to think of rental contracts in this realm as not changing, and this tax has hit their purses very hard.

Sir Paul Bryan: My hon. Friend the Member for Norfolk, South (Mr. MacGregor) said that the main debate on this matter will take place in Committee upstairs. I hope that it does. I hope that the matter is pursued to its ultimate there. Unfortunately, I am unlikely to be selected to serve on that Committee, so I should like to make my point now.
I should declare an interest. I am a director of two of the Granada companies, although not of the television rental company. However, before I was a Minister I was for five years a director of Granada Television Rentals. Among the things that I learned in that period was that, whereas there was a debate whether it was cheaper to buy or to rent a new set—one could follow that debate in the columns of Which? or other such publications—there was not the slightest doubt that people who could not afford a high rent and were satisfied with an old set got by far the cheapest bargain from a television rental company. That was not because the company was particularly altruistic or charitable, but for a simple, practical reason.
A television set lasts many years longer in the hands of a television rental company than in the hands of an individual. The company has expert mechanics and it is in its interests to keep the set constantly serviced. Some of the sets now in service in people's homes are very old. It is a wonder that they are still functioning. Their value has been written off years ago. Therefore, the company is

able to offer a fantastically cheap, admittedly very old, rental set, but a perfectly satisfactory one if a person is happy with that kind of set.
Therefore, people who have such sets on low rental for a long time are astonished when the Budget, in effect, announces that their rents, which have always been so cheap, are suddenly to go up. But those who have plenty of money can go out and buy a set in the morning and pay no extra tax at all. From the angles of humanity and justice, it is utterly wrong, but that is also the case on practical grounds. We live in an era when we are supposed to be keen on recycling and on conservation and all those sorts of things, when we are supposed to maintain equipment and not to replace it. Yet we are to have a tax on maintaining equipments and a "let-off" for those who buy new ones.

Mr. Winterton: It is not often in debate in this Chamber that I find I am in agreement with the hon. Member for Keighley (Mr. Cryer) and his colleagues, but on this occasion I am in full agreement with much of what they said.
I direct my remarks entirely to existing contracts which will be affected by this high rate of value added tax. The hon. Member for Keighley was right in saying that people who entered a contract expected it to be honoured, not only by the people with whom they made it, but by the Government. An arbitrary decision at the Dispatch Box which can alter an agreement to their disadvantage can create tremendous frustration and anger.
I hope that Ministers who sit on the Treasury Bench and represent the Government in the Standing Committee will give sincere understanding to the feelings of hon. Members on both sides who feel so strongly on this.
I emphasise that I am referring to VAT at the higher rate being levied on existing contracts, not that on new contracts, because anyone who makes a new contract knows the situation exactly. He knows how that contract will be drawn up, bearing in mind all the circumstances of the Budget announcement.
It is the way my constituents feel which affects me most strongly as a Member. I received a letter from a rental company,


Telefusion Limited, whose registered office is in Blackpool. It has received letters from constituents of mine and has sent them on to me. It is the very moderate terms of the letters which most strikes me, and makes me sympathetic to their point of view.
The first is a letter from a constituent in Sutton, a small village outside Macclesfield. It reads:
I regret I shall be unable to renew the above agreement when this present one expires in August 1975 as I cannot afford to pay the higher VAT increased rental, also increased licence.
Here is somebody who genuinely cannot afford it. He is not criticising Government, not marching in Parliament Square, nor going on strike, but pointing this out in sober fashion. He cannot afford something which every Member of Parliament and 95 per cent. of the country take for granted: the use and facility of a television set.
Another constituent, this time living in Macclesfield, comments:
In view of the rampant increases now appertaining, economies have to be made and quite frankly I am unable to afford the luxury of rented television.
In this day and age, when people have to set themselves out so clearly in that sort of letter, it indicates that this is an additional burden which they cannot shoulder, and they are prepared to do without the use of television in 1975. Perhaps that will indicate to the Minister that this is an area in which he can act without costing the Exchequer a lot of money, and he will then be showing that the Government care about contracts and are prepared to honour them. I look to the Government to change the position in Standing Committee.

Mr. Edward Lyons: I share many of the sentiments expressed in the debate. When they enter into a contract, people do not expect the Government to intervene later in such a way as to change the calculations on the basis of which the contract was made. There is one exception, in the building society mortgages, but not on the scale of the 25 per cent. VAT on existing television rental contracts.
I should declare an interest, as I have a television set on rental at home. When people consider entering into a contract to rent a television set, they calculate what it will cost and the size of the set that they can afford. They decide whether to buy or rent. I am receiving letters from people saying that if they had known that there would be an increase in the tax on rentals they would have bought their set instead of renting it. The size of the set in relation to one's means is a material matter. If people had known of this imposition they would have had a smaller set. They are now faced with much greater expenditure than they expected.
The Government have made a poor job of explaining the reasoning behind the increased taxation on rental contracts. The very least they could have done was to publicise their reasons. In his Budget speech my right hon. Friend the Chancellor should have gone into the reasons why the Government felt justified in doing what they propose to do to existing contracts.
One looks for a logical reason for behaviour of this kind from what are otherwise a kind-hearted Government. I imagine that they will say that the television rental companies have to find the materials to repair the sets. The hiring charge includes a payment for the capital value of the set, interest on that value, and labour charges and components when the set is repaired. The companies presumably now have to pay 25 per cent. VAT when they purchase the components, and, therefore, I imagine that the Government will say "How could we let the hirers—the ordinary household, the old-age pensioner and so on—off the 25 per cent. imposition, when the companies will have to pay 25 per cent. VAT on the repair charges?"
We must bear in mind that only a small part of the television repair charge relates to the cost of replacement equipment. If that is an argument at all, it is an argument only for increasing VAT by a very small percentage above the current 8 per cent. It is certainly not an argument for increasing it to 25 per cent.

The Chairman: Order. This is a narrow amendment, which questions only whether the higher rate of VAT shall apply to existing contracts of hire, and not the whole broad question of VAT.

Mr. Lyons: I entirely agree, Mr. Thomas. That is exactly what I am talking about. I am only talking about the existing rental contracts, which include a component for the repair of sets, including new valves and so on. The charges are based on a number of calculations, including the cost of repairs. I am saying that the rental companies have to buy the components at 25 per cent. to go into sets which are subject to existing rental contracts. I have not departed from the amendment by one jot.
12.30 a.m.
The other point is that the Government are motivated by the fact that a huge sum of money can be raised from 12 million sets which are subject to existing contracts. I do not know what the Government expect to raise on average per set, but if it is £5 they will get £60 million extra, and if it is £10 they will get an extra £120 million a year. We are talking in huge sums of money, and this is tempting to the Government. They would have to look in other directions to impose this extra burden if they did not get the money in the way they propose. I know that it would be difficult for them to find other means of raising the money, but this is interference with existing contracts in a most unexpected way.
This heavy impost will fall on many people who are poor and cannot afford it. They are committed to a contract and to working to a tight budget, and now they will have to find this extra money. The Government should say that they will not interfere with existing contracts, even if it means increased taxes in other directions. I appreciate that the Government must have the money, but they should not obtain it in this way.

Mr. Giles Shaw: I could not help smiling when I heard the hon. and learned Member for Bradford, West (Mr. Lyons) refer to a possible link between component costs and the cost of television rentals. You were not in the Chair a short time ago. Mr. Thomas, when we were arguing with the Financial Secretary about the problems involved in component costs and servicing.
The main reason why we are all expressing concern about this proposal is the sheer scale of it. About 12 million sets are involved, and large numbers of those affected are the poorest families in

our constituencies. I pledged a large meeting of pensioners that I should raise this Matter in the Committee to try to force the Government to change their mind about the retrospective, as it appeared to them, imposition of this cost in their rental agreements.
I think the anxiety of these people can be expressed by the fact that the rental of a television set—and many of them have been rented for 10 years or more—becomes a household cost and can be fixed precisely. These people have suddenly found that as a result of the Budget they are faced with this imposition on rental agreements. The pension increase to which they were looking forward in April had been committed largely to food and other costs, and when the rental increase came along there was a genuine feeling that the Government had acted almost vindictively towards those living on small pension incomes.
I believe, and I think many people do, that the television set is an essential for the pensioner. I say that because it provides not only companionship where there might be none, not only light where there might be darkness, but real friendliness at all times for those who may lack friends. I urge the Government also to review the television licence fee. That is not the subject of the debate and I know, Mr. Thomas, that you will rule me out of order if I mention it once more, but the Government should look again at the question of imposing this charge on existing rental agreements.
Those who have received correspondence since the Government announced this measure have been surprised at the scale of the anxiety expressed. This measure has hit hard at people's understanding. Why, they ask, can the Government do this to a contract which has been signed? Why can they do it when the contract has been in existence for 10 years or more? Why have they done this to a renter but given considerable relief to those who can purchase outright by not changing the rate of VAT between the date of the announcement and 1st May? This was a clear advantage to those who had money to buy during that period and thus avoid paying the increased imposition.
To television renters, the majority of whom, I suspect, live on less than average


earnings and certainly a large percentage of whom are among the disabled, pensioners and the housebound, the renting of a television suddenly became significantly more expensive and their personal income became sorely tried to meet it. When we have rightly heard so often that they face increased costs which the Government must take action to help them bear, their faith in the Government who took this view about rental agreements is what has been shaken most.
I greatly regret that we have had to draw attention in this way to what I consider to be an ill-judged measure. I recognise that the £100 million of revenue involved is a highly significant item.

Mr. Winterton: Does my hon. Friend feel that the Government might have overestimated the amount of revenue resulting from this increase in VAT on existing contracts? If the trend of people ending their contracts and returning their television sets turns into a flood, as I suspect it might, could it not be counterproductive so that what the Government have to pay out in unemployment benefit far outweighs the tax they collect?

Mr. Shaw: I have little doubt that this might be one of the actions taken in the Budget which might redound to the Government's disadvantage. The more important factor with which to concern ourselves, however, is whether this is a justifiable measure given the existence of the long-term rental agreements which we are discussing.
I urge my colleagues in Committee to pursue this measure with vim, vigour and determination. There is not, I suspect, a pensioner in the land who would not be at their beck and call if they wished to demonstrate the anxiety which they feel at this tax. Therefore, I urge my hon. Friends to pursue this to a vote in Committee. I am glad that even at this late hour we have had the chance to draw the Government's attention to this problem, and I urge them to think again.

Mr. Edward Lyons: Before the hon. Gentleman sits down—

Mr. Shaw: I have already sat down.

The Chairman: The hon. Gentleman tells us that he has sat down.

Dr. Gilbert: I quite understand the strong feelings which have been aroused and which have been communicated to hon. Members which they have reported to the Committee in the course of the debate.
Possibly there may be some misunderstanding about this matter in the sense that one has heard the word "retrospection" used so often tonight. Of course there is no retrospective effect in the sense that, whereas the tax will apply to existing contracts, under our proposals it starts to run only from the date of introduction. [Laughter.] There is no retrospection. It is as simple as that. Perhaps I should say "the date of announcement" if hon. Members prefer it.
I assure the Committee that this change in the rate of VAT was not in any sense an ad hoc decision. The fact is that changes in the rate of VAT will operate almost immediately on the supply by rental of any goods where the supply goes over a long and indeterminate period. That is inherent in the main VAT legislation and is to be found in Part I of the Finance Act 1972.
To be technical for a moment, the tax has to be charged on the value of the supply of goods or services, which is determined by reference to the consideration given, under Section 10 of that Act. There is no means of doing this for a hiring of indeterminate length except by splitting the hiring into a series of successive supplies. This is inherent in the general corpus of VAT legislation, and we are doing nothing new in this particular change in the rate of VAT.
I am grateful to my hon. Friend the Member for Bradford, West (Mr. Lyons) for pointing out that it is impossible always to shield people from the effects of indirect tax changes, and other Government fiscal decisions which have effects on long-term contracts.
The effects on mortgage payments were instanced. These are far more onerous on a person buying a house on a mortgage than anything involved in these proposals. When the mortgage rates go up—very largely but not always as a result of Government action—or the rates on a house, it is far less easy for the individual citizen to shed himself of that contract and renegotiate another for


a more limited amount of money than it would be with respect to a change in the VAT on a television rental. Precisely the same conditions apply with the long-term hire of cars, which will be affected by changes in the rate of excise duty and the rate of tax on petroleum products.
Having said that, it is right to point out that the rate of increase, as far as the individual hire is concerned, while obviously appreciable, and one that we regret, is not all that great. For a monochrome set the average increase will be about 35p a month, or 8p a week. For a colour set we calculate that it will be about £1·10 per month. It has never been part of our case that television is a luxury. But I really think that it is a little difficult to suggest that colour television is essential. For somebody who can afford a basic rental of a colour television set, an additional £1·10 a month, while certainly undesirable and unwelcome, is not the sort of expenditure that will reduce that person to penury.

Sir John Eden: One has to bear in mind the other rises in cost that people are experiencing these days. One tends in dealing with a particular point in a Committee like this to look at it rather narrowly, but I hope the hon. Gentleman will understand that in many cases this straw is the final straw, in the light of the accumulation of costs that everybody has been experiencing. When this sort of thing comes along it does probably proportionately even greater damage than might appear from the study of the individual case.

Dr. Gilbert: I am obliged to the right hon. Gentleman for the moderate way in which he phrased his intervention, but, as I recall, it was he who a little earlier in this debate was saying how significant these particular price increases will be to the pensioner, and how the pensioner did not get the benefit of the big wage increases that other members of the community receive. I remind him that the old-age pensioner is now effectively "indexed" to increases in money wage rates, so that pensions will go up with increases in wage rates throughout the community. Obviously, again, the increases are of the sort that we would have preferred to do without, but the amounts of money involved are very considerable. I am not resting my case on that at all. I am quite clear in my mind

that there is not a question of inequality here.
Whenever the level of indirect taxation is changed, there are bound to be swings and roundabouts between purchasers and hirers of commodities. For example, at some future time it is not beyond imagination that we could find a Conservative Government back in office in this country, pledged to reduce the difference between the higher rate and the standard rate, and possibly eliminate it altogether. I imagine that hon. Members of the Opposition would have set as one of their first priorities the reduction of the higher rate of tax that we are discussing this evening. If this is to come about, the result will be that those who bought their sets at the old rate will be stuck with having had it incorporated in the purchase price. But, immediately, those renting equipment will get the benefit of the lower rate of VAT.
There is a swings and roundabouts effect here. When tax rates go up, those who are not renting are liable to get caught and those who bought ahead of the increase will have protected themselves. Similarly, when the rate goes down precisely the reverse considerations apply. There is an identical, mirror image effect.
12.45 a.m.
My hon. Friend the Member for Keighley (Mr. Cryer) talked about people with brass in their pockets being able to anticipate a year or two's rental and thereby free themselves from the incubus of the additional tax. He is right. But this is one of the unfairnesses of this world. People with brass in their pockets are often able to protect themselves against increases in indirect taxation. They can go out on the very evening that my right hon. Friend has announced increases in excise duties and stock themselves with hugh quantities of whisky, gin and whatever else they may want from their local off-licences, where the person of more modest means is unable to carry stocks of that kind. Unfairnesses of this kind are inherent in our society, and it is not possible by any change in the fiscal structure to eliminate them in the future.
The hon. Member for Howden (Sir P. Bryan) raised one matter which interested me greatly. He talked about a


lot of rental sets being very old and having had their value written off years ago. We know, and make no complaint about the fact, that that is where the rental companies often earn their gravy. I recognise that maintenance costs rise when a set is old. But, generally speaking, a leasing company gets its large profits in the later years of a long-life piece of consumer durable equipment. But, in that case, when talking about a modest sum of 35p on an old black and white set, it is not impossible for the rental company to carry the charge itself and absorb it in its profits.
I am happy to tell the hon. Gentleman that if he had had the good fortune to rent his set from the Dudley Co-operative Society, that is precisely what would have happened.

Sir Paul Bryan: I was merely confirming the information that the hon. Member for Keighley (Mr. Cryer) obtained from his letters. I was confirming it from a practical point of view and saying that this is bound to happen, which is why they are so cheap. That is also why many television rental companies have special rates for old-age pensioners. They are able to do it for this reason.

Mr. Nott: I thought it was strange that the Financial Secretary should at one moment seek to justify the increased rate of VAT on television rentals by saying that if a Tory Government were to come to power and reduce the rate of VAT, the benefit would then be the other way. That is hardly an argument which is likely to appeal very much to the hon. Member for Keighley (Mr. Cryer), the hon. and learned Member for Bradford, West (Mr. Lyons), of the hon. Member for Newham, South (Mr. Spearing).
Then the Financial Secretary said that we could all be pleased that the tax did not begin to run before its introduction. We are open to expect any kind of novel revenue innovation from this Government, but we have yet to have a tax imposed upon us which begins before its introduction.
I think that there is more feeling about this measure in the Committee and in the country than the Financial Secretary, perhaps wisely, is prepared to admit. Having lictened to my hon. Friends the

Members for Norfolk, South (Mr. MacGregor), Bournemouth (Sir J. Eden), Howden (Sir P. Bryan), Macclesfield (Mr. Winterton) and Pudsey (Mr. Shaw) and to the four Government supporters who spoke, it seems to me that we have before us a little measure—although it affects 12 million sets—about which it is most likely that the Government may be forced to change their view.
In Standing Committee we shall be pursuing this matter extremely vigorously and tabling amendments to the schedule on all the various aspects, which unfortunately we are unable to do on the clause. I assure the Committee that we shall be doing our utmost to remove this increase. We understand that a lot of revenue is involved, but that does not make the imposition justifiable. The Financial Secretary talks about an extra 8p a week, but that does not remove the fact that a 16 per cent. increase is involved, which is no small increase to be imposed at one point of time on people who already have a television set rental outstanding and suddenly find that kind of percentage increase imposed. I assure the industry, whose representatives I have already met, that we shall be tabling amendments to the schedule and that we shall vigorously oppose it as best we can.
As many of my right hon. and hon. Friends said in earlier debates today, we believe that the higher rate is unjustified in equity and unnecessary for the Government's revenue. We believe that there would have been a much wiser and fairer alternative means of raising the equivalent sum, although I accept that about £100 million is involved here.
I leave the matter there for the time being. The Government will be hearing a great deal more about it during the passage of the Bill. We shall be doing our utmost to get rid of this proposal before it ends its progress.

Mr. MacGregor: Having listened to the debate, as I did to the two previous debates on VAT, and in view of all the criticisms and worries expressed from both sides of the Chamber and mirrored in the country at large, and having heard the most inadequate reply from the Financial Secretary, I am more than ever convinced of the mistake of going away from: the 10 per cent. rate of VAT.
This has been an object lesson to us all in thinking of the future of the tax. It is the very high jump from 8 per cent. to 25 per cent. which has caused so many of the worries. The Chancellor's need for extra revenue could have been so much better dealt with by a straight move from 8 per cent. to 10 per cent., which would have helped him in his public sector borrowing requirement needs.
No doubt we shall be arguing about these matters further in Standing Committee. My right hon. and hon. Friends have become accustomed on one or two occasions recently to having to go into the Lobby with the Government Front Bench and Government back-bench Members, supporting the official Government view in order to bail them out against the Tribune Group, who are the signatories of Early-Day Motion No. 477 to which I referred earlier. It looks as though on this occasion we shall have an unholy alliance of the reverse sort. I hope that there will be some members of the Tribune Group in Standing Committee, as there have been in the past, who will follow the line taken by the hon. Member for Keighley (Mr. Cryer).
With that hope and in the belief that we shall get some improvement and change in Standing Committee, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 17, as amended, ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Pendry.]

Committee report Progress: to sit again this day.

Orders of the Day — FAMILY INCOME SUPPLEMENT

12.55 a.m.

The Under-Secretary of State for Health and Social Security (Mr. Alec Jones): I beg to move,
That the Family Income Supplements (Computation) Regulations 1975, a draft of which was laid before this House on 1st May, be approved.
The prescribed income levels for family income supplement were last raised on 23rd July 1974 and these draft regulations provide for them to go up again

on 22nd July, a year after the last up-rating.
We on this side of the House have consistently made clear our dislike of the Family Income Supplement Scheme, based as it is on a means test. Our long-term aim remains to reduce the rôle of means testing by extending the system of universal social security benefits. As a first step we increased family allowances in April this year and our proposals for a new system of family support, to start in April 1977, are embodied in the Child Benefit Bill which had its Second Reading on Tuesday. The child benefit scheme will improve and simplify the present system of family support and will further reduce dependence on means-tested benefits such as supplementary benefit and family income supplement. For the time, being, however, the family income supplement still has a part to play.
As regards details of the increases, Regulation 2 increases the prescribed amount for a one-child family from £25 to £31·50. For each additional child the prescribed amount will be £3·50 higher, instead of £3 as at present. Regulation 3 increases the maximum weekly payment—at present £5·50 for families with one or two children and for other families £7—and introduces a more equitable system under which the maximum increases progressively with each child. The maximum weekly payment for a one-child family is increased to £7 and that amount goes up by 50p for each additional child.
This is a structural change which I am sure will be welcomed and is expressly designed to help the large family. For example, under the present system a family with six children receives the same maximum as a family with three children. From July the maximum amount payable for the six-child family will be £1·50 higher than that for a three-child family.
Since the family income supplement payment is half the difference between the gross family income and the appropriate prescribed amount, the effect of the regulations will be, subject to the application of the new maxima, to give an additional £3·20 or £3·30, according to rounding, to existing beneficiaries who are one-child families.
Family allowances which were increased on 8th April 1975 are treated as income for family income supplement


purposes. Consequently families claiming the supplement after 8th April 1975 have the increases in the rates of family allowances taken into account when calculating the rate of FIS payable, and the FIS rate is reduced by half the amount of the family allowance increases. These families will receive the full FIS increase when the prescribed amounts go up in July. Other families who claimed FIS before 8th April and whose awards are still current have not had their rate of family income supplement adjusted to take account of the family allowance increases, because under the existing legislation no account can be taken of the increases until the FIS award is renewed, which is normally 52 weeks after date of claim.
We intend that, to prevent duplication of provision and to secure equity with those who claimed later, the family allowance increases will be taken into account at the FIS uprating date on 22nd July this year. Power to make the adjustment in the rate of FIS payable will be provided in regulations laid under the negative resolution procedure to be made under Section 6(3) of the Family Income Supplements Act 1970 which will shortly be laid before the House.
For the small number of families who are receiving maximum payments, the immediate increase will be limited to £1·50 for the one-child family, £2 for the two-child family, £1 for the three-child family and then increasing in 50p steps for each additional child. But these families will be helped, by the higher prescribed amounts, to remain on the maximum rate when they come to renew their awards, even though their income has gone up since their previous awards were made. The unevenness in the amount of the increases for smaller families is due to the logical changes we are making in the system of maximum payments and cannot be avoided on this occasion.
It is estimated that in the year immediately following this uprating some 70,000 families will benefit from the family income supplement at a total cost, including the uprating, of about £11 million. I emphasise that this is within my existing departmental programme for expenditure. As on previous occasions, the new rates will be put into payment with the minimum of trouble to bene-

ficiaries. Families already holding books at the present rate will be asked by individual letters to return them in stages for overstamping. Claims received between 27th May and 22nd July will be considered under both sets of prescribed amounts; awards will be at the old rate until 21st July and at the new rate thereafter.

1.2 a.m.

Mr. Kenneth Clarke: It was 15½ hours ago that I approached the Under-Secretary of State across the Committee floor. As our Committee had morning and afternoon sittings I seem to have been debating against the hon. Gentleman for a considerable portion of the time that has since elapsed.
It is a pleasure to begin by saying that we welcome the measure before us which raises the prescribed amounts for family income supplement. Having welcomed it, it is interesting to reflect that the supplement was very much denigrated by the Labour Party when in opposition when the then Conservative Government brought it into operation. Despite that denigration, this is the second time that the Government have found it a useful enough instrument to uprate so as to increase the range of benefit available. It is the main instrument which the Government have to hand against family poverty until the new child credit scheme can come into operation. If they have their way, that will not be before April 1977.
When we introduced the family income supplement we made it clear that it was intended to be a transitional benefit and that it would be phased out at such time as an equivalent to the child credit scheme could be introduced. Although we are now using it as a transitional arrangement it is interesting to note that at the moment it is heavily used by one-parent families. Such families will benefit considerably from the announcement which has been made tonight.
The composition of the beneficiaries has changed drastically since the supplement was introduced. In 1971 one-parent families represented only about one in three of the claimants. By 1974 one-parent families represented more than half of those receiving the benefit. That means that the supplement has done more for one-parent families to give them some


modest relief against family poverty than almost anything else that either Government have brought into operation.
It is true that the family income supplement suffers from the difficulty of a comparatively low level of take-up. However, it is important that we do not exaggerate the low level of take-up, as do many who wish to down-rate the value of a means-tested benefit. The low percentage of take-up exaggerates the true position because many of those who do not bother to claim FIS are those who would derive very little benefit from it if they claimed. Those who are on the fringe of eligibility and who might qualify only for pence if they claimed do not bother, with the result that the percentage of those eligible is reduced.
One worrying feature is the number of wage-earning families with many children who could benefit from FIS but who do not take it up. That is related to the extent of the publicity given to the availability of FIS. If the Government intend to keep FIS, as they must for the next two or three years, they should use it properly and not try to reduce the esteem of a means-tested benefit by continuing to upgrade it but refusing to make the modest expenditure necessary to bring it to the attention of the people who are meant to benefit from it.
The number of people claiming and receiving FIS is actually dropping. I believe that there is a correlation between the drop in the number of beneficiaries and the drop in the expenditure on advertising that the Government undertake. On 5th February I asked the Under-Secretary of State to give me information on the number of families receiving FIS at the end of each year since the introduction of the scheme. In 1971 there were 71,000, in 1972 82,000 and in 1973 95,000, and it was provisionally estimated at the end of November 1974—the latest date for which information was available—that only 72,000 were receiving FIS, the figure having dropped dramatically by 23,000.
There is a remarkable correlation between those figures and the amount of money the Government have spent on advertising the benefit. On 21st January the Minister of State informed me in answer to a Written Question that expenditure on advertising was £310,000 in

1971, £325,000 in 1972, £161,000 in 1973 and £124,000 in 1974. That means that the Government are ceasing to advertise the availability of FIS.
Will the Under-Secretary of State tell me the view taken by the Government of the amount of money that needs to be spent on an advertising campaign for it to be worth while? My impression is that it is estimated that between £250,000 and £300,000 is needed to increase the level of take-up of benefit, £150,000 is needed to sustain the level of a means-tested benefit, and less than £150,000 produces a campaign which is not worth bothering with because it is inadequate. The Government have dropped below £150,000. When they are raising the level of benefit, the least they can do is to follow up and make sure that those we are supposedly trying to help know about it.
The problem of the poverty trap or poverty surtax results from the woeful lack of correlation between what the Department of Health and Social Security is doing with FIS and what the Treasury is doing in another sphere of government in raising tax allowances and tax thresholds. There is a relationship between the effect of the regulations and the disgraceful failure of the Government to raise tax allowances to enable poorer families to keep below the tax threshold. The effect of the Government's action is that 1 million poor people who were not paying tax 12 months ago have been brought into tax. The combination of these tax rates with the rates of FIS and the eligibility levels in the regulations produces a punitive effect on lower income earners.
It is a feature of FIS that it has the equivalent of a marginal tax rate of 50 per cent. built into it. Every time a beneficiary earns an extra £1, he loses 50p off his FIS entitlement. If he is above the tax threshold, he also pays 35p in income tax. That means that every time someone at this very low level of earnings earns an extra £1, 85 per cent. goes at once on reduced FIS and income tax.
In addition to that 85 per cent. tax, in effect, one has to take into account such things as the loss of free school meals and of rent and rate allowances. Thus a number of low-wage-earning families are worse off in effect if they


get a nominal increase when their union gets a modest increase in the level of their earnings.
I shall not read out the figures which the Library has kindly supplied me, but I ask the Under-Secretary to look at the correlation between the prescribed amounts for FIS and the weekly percentage tax allowance that the Budget has allowed for low-wage-earning families. Every time the tax threshold gets above the FIS eligibility level, the problem arises that one Department says that these people need help with their earnings through FIS while another Department says that they are well enough off to pay tax.
What has happened because of the Chancellor's stinginess and the Government's attempt at generosity is that the gap has become devastatingly wide. For a married couple with young children, the gap between the level of earnings at which they become liable to tax and the level at which they reach the prescribed level for FIS is about £8, for a married couple with older children it is £6 or £7, and for a married couple with children over 16 it ranges from £7 down to £4. That gap is far too wide. Many families are in the position where, as a result of Government inconsistencies, increases in their incomes make them worse off.
A man earning £22·98 with one child under 11 pays no tax and receives £4·26 FIS, giving a total income of £27·24. If his pay increases by a £1, he loses 50p FIS plus 35p tax. So his net income increases by only 15p—and that is assuming that he will not suffer a loss of rent and rate rebates and free school meals. He will be worse off if he does.
I illustrate finally from a Parliamentary Answer given by the Minister of State on 14th November. He had been asked by my hon. Friend the Member for Norfolk, North (Mr. Howell) to estimate the number of people currently in the poverty trap. The figures given by the Minister were for August. He said that no fewer than 50,000 families were then in a position where an increase of £1 in their earnings would produce a negative result—would make them worse off; 150,000 families could get only up to a 24p increase out of an extra £1 in earnings, and 240,000 families would get only a 25p to 40p increase.
These are not surtax payers but the very poor, who are being punitively treated more by incompetence and by the fact that two Departments do not act in concert than by deliberate action. The hon. Gentleman must realise that his colleagues in the Treasury are endeavouring to undo the good work of his Department through measures such as this. It is time that his Department pointed out to the Treasury how much damage is being done and repeated to the Chancellor the point we made the other day. We illustrated the terrible record that is being acquired by the Government on the subject of family poverty. It has been clearly demonstrated by groups such as the Child Poverty Action Group that the poorest families are becoming steadily poorer. The social contract and the other Government measures have failed to increase the social wage adequately to meet the circumstances of such families.
If the Government followed up this measure with a proper increase in the tax threshold for poorer families, that might have a more worthwhile effect on reducing the number of families in poverty.

1.15 a.m.

Mr. Bruce George: I apologise for intervening in this debate as I understand that it is not the tradition for back benchers to chip in.
I dislike the concept of FIS. Last year in a parallel debate the then Under-Secretary of State for Health and Social Security, my hon. Friend the Member for Newcastle-upon-Tyne, West (Mr. Brown), said:
As we have already made clear, the present administration does not like FIS.
He went on to say:
It is not our intention to leave FIS as a permanent part of the social security structure. We are working towards its elimination."—[Official Report, 13th May 1974; Vol. 873, c. 1055]
I should like to know when that process is likely to be realised.
It is very easy to say that the Government dislike FIS. The danger is that if we improve something that we dislike, it makes an unsatisfactory concept marginally more satisfactory while the goal towards which we are moving recedes further and further into the distance, thus rendering the final abolition of FIS much


more difficult. The sooner FIS is replaced by something more adequate, the sooner I shall rejoice. However, I welcome the raising of the rates of FIS. I ask my hon. Friend to pass that comment on to his colleagues.
In previous debates the Labour Party committed itself to the abolition of FIS. I hope that in annual debates of this kind we shall not see the progressive raising of the FIS levels. I hope that the Government will move progressively and swiftly towards the elimination of FIS.
FIS was introduced as a temporary measure, somewhat on the lines of the temporary measure which after the Second World War introduced prefabricated houses which in many cases are still with us. Despite the high hopes of the supporters of FIS, many of its objectives have failed to be realised.
Originally it was estimated that FIS would assist about 190,000 households containing approximately half a million children. It was originally estimated that there would be an 85 per cent. take-up rate, and a lot of money was spent on advertising. Despite the advertising, which was on a low scale, the take-up rate is still approximately 50 per cent. Perhaps even at this stage the Opposition will give us the evidence upon which they based their assumption that the take-up rate would not be quite as bad as might appear at first sight. I should welcome evidence to support the case.
Means-tested benefits clearly do not work. They have not worked in the past. I dislike the propping up of this system of means-tested benefits, which these regulations will assist. The number of persons claiming FIS has declined. Government supporters do not view that situation with relish.
I should like to know what attempts are being made to increase the take-up and to reinforce what was said by the hon. Member for Rushcliffe (Mr. Clarke), with whom I rarely agree publicly or indeed privately, about advertising. In 1971, £310,000 was spent on advertising. In 1974 the figure was £124,000, despite inflation. I believe that it is difficult to find a single correlation between the take-up and advertising. I should perhaps

add that at the end of 1971 I estimate that 71,000 families were claiming FIS and £310,000 was spent on advertising. At the end of 1974 the figures were 72,000 families claiming and £124,000 spent on advertising.
When the scheme was first introduced a great amount was spent on advertising, but the take-up rate was low. It is no lower now, even though less is spent on advertising. Therefore, I do not believe that there is any simple correlation.
I wholeheartedly endorse the condemnation of the fact that so little is now being spent on advertising. If we are to have means-tested benefits, clearly people must be fully informed of what they are entitled to receive.
Many aspects of the family income supplement are open to criticism. I do not want to labour the point at great length at this time. However, I should like to refer to the difficulties facing people applying for family income supplement.
Filling in the application form now is still something of an obstacle course. It is difficult for people to complete. Large numbers of people have their applications rejected. I believe that a considerable number of applications were rejected in 1974. The numbers of those who appealed against the rejection of their applications clearly indicate that people find great difficulty, as I do when looking at statistics, in ascertaining whether they are eligible to claim.
The family income supplement was conceived as a small measure. It is small in terms of cost. It has been small in terms of impact. Poverty cannot be abolished on the cheap. Whatever claims we may make for FIS, the expenditure has been derisory. If we are to combat poverty, which I believe the Government are doing, more money must be spent.
It was ironic listening to the hon. Member for Rushcliffe chastising the Government for failing to combat family poverty, recalling that the Conservative Governments record is hardly worthy of great appreciation. The present Government have on many occasions taken measures to combat family poverty, but to come here annually to uprate the FIS is no substitute for combating family poverty.

1.23 a.m.

Mr. Alec Jones: I understand that on one occasion the hon. Member for Rushcliffe (Mr. Clarke) and my hon. Friend the Member for Walsall, South (Mr. George) played for the same football team. They certainly seemed to be shooting the same ball at me tonight.
I should like to deal first with the take-up, to which both hon. Members have referred. The hon. Member for Rushcliffe said that the numbers of people in receipt of FIS in 1974 had dropped. That was because the numbers entitled to FIS had dropped. In 1972 it was estimated that 225,000 people were entitled to FIS. In 1975 the numbers entitled to it had dropped to about 100,000. If there is a drop of half in the number of people entitled to FIS, it is obvious that there is likely to be a similar drop in the numbers claiming it.
Concerning the take-up percentage, the position is not as gloomy as both hon. Members suggested. In 1972 the take-up was 50 per cent. The estimate for 1974 is that about three-quarters of those who are entitled to claim FIS were in receipt of it.
The other point I want to make concerns publicity. The Department will continue to carry out a publicity campaign. Perhaps the hon. Member for Rushcliffe will be interested in this issue because the Department for the first time has decided with this increase, to send out 26,000 leaflets to the 26,000 people whose claims were last rejected, since they are likely to be the very group who will be brought in as a result of this uprating.
I hope that the hon. Member will take it that we are aware of the need for publicity and are trying to do something rather new in making a direct approach to people we think likely to benefit.
The hon. Gentleman went on to talk in general terms of the poverty trap. It is true that the problem has bedevilled successive Governments for a long time.
I do not think that either Government have been complacent about the problem of the so-called poverty trap, which has certain problems inherent in it. One of them is that many of the benefits are spread over and there is a time lag before they are brought into operation. It is thus not always easy to show exactly the extent of the poverty trap.
This is one of the undesirable side effects of any system of means-tested benefit, but it is clear that as a consequence of this measure—and I accept the hon. Member's point that we must seek some co-ordination in all measures dealing with poverty—families receiving FIS will be better off as a consequence of the uprating. At present we consider that to be an overriding factor.
My hon. Friend the Member for Walsall—

Mr. George: Walsall South.

Mr. Alec Jones: I am sorry. We must be careful in talking in such general terms. There are differences in different parts of Walsall, I gather. I did not mean that disrespectfully to my hon. Friend or to the people of Walsall.
What my hon. Friend the Member for Walsall, South said is true. We dislike FIS, as we dislike all sorts of means-tested benefit, but in FIS we are faced with a practical problem. That is true. We shall bring in something better in its place, but we have to live with it and to work towards the implementation of non-means-tested benefit. In the meantime hon. Members will agree that while we are working towards that it would be undesirable for the existing protection to be removed.
When child benefit starts in 1977, FIS will have to be restructured to take account of the changed pattern of family support. Provision for restructuring is contained in the Child Benefit Bill, but the exact form cannot be worked out until the benefits are known. Those benefits will reduce dependence on FIS.

Mr. Kenneth Clarke: Do I gather, therefore, that it is intended that when the Child Benefit Bill comes into effect, some form of FIS will survive for a measurable period? Is it the fact that the Government's Child Benefit Bill is not seen as replacing it effectively?

Mr. Jones: It would be unwise to make general assumptions about the extent of the coverage of the Child Benefit Bill until the rates are announced, and then we shall be in a position to check or verify any assumption about it.
I have tried to answer the points raised by hon. Members. I am sorry that my hon. Friend the Member for Walsall,


South seemed to think that the filling in of the form was causing trouble. Obviously, the fact that so many people are being benefited shows that some do not find it difficult. I accept, however, that some people find this difficult. My hon. Friend said that a considerable number of claims had been rejected. We hope by this uprating to include many of those whose claims have been rejected in the past.
The hon. Member for Rushcliffe and I have been at this all day. I understand why he should give his usual welcome at the beginning and spoil it by his attack at the end. When he prays in aid the Child Poverty Action Group he is taking things a bit far. His Government made a categorical promise to the group that they would raise family allowances in 1970. He knows only too well that the family allowances were not raised from 1968 until this Labour Government raised them this year.

Question put and agreed to.

Resolved,
That the Family Income Supplements (Computation) Regulations 1975, a draft of which was laid before this House on 1st May, be approved.

Orders of the Day — STATUTORY INSTRUMENTS

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments),

LEGAL AID AND ADVICE

That the Legal Aid (Financial Conditions) Regulations 1975, a copy of which was laid before this House on 23rd April, be approved.

That the Legal Advice and Assistance (Financial Conditions) (No. 2) Regulations 1975, a copy of which was laid before this House on 23rd April, be approved.—[Mr. Pendry.]

LEGAL AID AND ADVICE (SCOTLAND)

That the Legal Aid (Scotland) (Financial Conditions) Regulations 1975, a copy of which was laid before this House on 24th April, be approved.

That the Legal Advice and Assistance (Scotland) (Financial Conditions) (No. 2) Regulations 1975, a copy of which was laid before this House on 24th April, be approved.—[Mr. Pendry.]

Question agreed to.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pendry.]

Orders of the Day — BUS FARES (DERBYSHIRE)

1.31 a.m.

Mr. James Scott-Hopkins: At last we have come to the most important part of the day's proceedings, when I can ask the Minister for Transport abut a problem which is causing my constituents a great deal of anxiety—the increase of bus fares in February in Derbyshire, particularly in my part of the county, West Derbyshire.
I am sure that the right hon. Gentleman is aware of the extent of the rises in West Derbyshire. The Trent Motor Traction Company has been given permission by the traffic commissioners to increase fares by 34 per cent. overall. That is exactly what has happened. But the company has tapered the increase, so that there is a bigger percentage rise for the shorter journeys. The longer the journey, the smaller the increase.
I shall not weary the House with all the figures that the company has kindly sent me of the various increases. I shall simply say that they range from more than 60 per cent. to a very small percentage rise. All the high percentages—60 per cent., 54 per cent., 40 per cent. and 34 per cent.—are for very short journeys, the ones that are made most.
It would be wrong if the Minister thought that I was talking of only one area, Matlock. The figures I am giving also apply to places in the northern part of my constituency, such as Great Long-stone, as well as places elsewhere in the constituency such as Brailsford and Ashbourne. There is great anxiety. Many constituents, particularly the older people, have complained to me.
I can understand the reasons why the traffic commissioners accepted the case put forward by the company, whose costs had increased by £1,177,550 between last August and the time of its application—a fantastic rise. The Midland General Company also experienced a rise in costs, though not to the same extent.
The Trent Motor Traction Company had to fight for an increase in fares. When the case was before the traffic commissioners there were objections from all the local councils. For example, the Great Longstone Parish Council objected, as did the Ashbourne and Matlock councils. There was a great outcry in the area. Nevertheless, the traffic commissioners in their wisdom decided to do this.
The result is these stupendous rises in short journey fares-54 per cent., 60 per cent., and so on. I think that people will start refusing to go on short journeys, particularly in the southern part of my constituency. There are no trains in the area, and because petrol and private motoring is so expensive older people will be much more isolated. I am sure we all want to avoid that happening.
I know that the Minister is in something of a predicament because he does not have extra finance which he can give or promise to give. Because of our present economic situation it is difficult for the right hon. Gentleman to make any helpful suggestions about providing money, and the same problem faces the local authorities. They are entitled to provide cross-subsidisation from the rates, but in recent circulars the Government have made it difficult for local authorities to come forward with plans to help.
The right hon. Gentleman knows my constituency and he knows what Matlock is like. It is built on a steep hill. Pensioners and mothers with children use the buses for short journeys to go shopping and to get themselves back home up the steep hill, and with these increased fares they will be faced with a considerable financial burden.
I hope that the right hon. Gentleman will discuss this matter with the Trent Company. I have had discussions with it, but perhaps the right hon. Gentleman will be able to influence the company more than I have done. I hope he will ask the company to explain the basis on which it has distributed the 34 per cent. overall increase. I accept that the company needs this money, because without it there would be a large deficit and we should probably end up with another nationalised company, and that cannot be tolerated, but the right hton. Gentle-

man should invite the company to re-examine its fare structure and try to ensure that these heavy increases are not imposed on short journeys. The geographical features of a town such as Matlock make it essential for transport to be readily available to pensioners and mothers with young children.
There is nonsense going on in connection with the bus services in the northern part of my constituency, and this is becoming a burning issue. I have been informed by Great Longstone Parish Council that the buses which take parishioners into Bakewell to catch a connection to Sheffield or Buxton and Manchester miss the connections by a few minutes because the schedules have been retimed. I have asked the company to reconsider the schedules but it is having difficulty in doing this. I hope that the Minister and the company will examine this problem, because it is a source of irritation to my constituents. The company suggested that my constituents should catch the school bus at about 8.15 a.m., but there is no room on the bus for other than schoolchildren.
Finally, there is the question of school buses and schoolchildren. This has been a sore point for a long time and I do no more than mention it tonight. I raised this problem with the right hon. Gentleman's predecessor when we were in government. On that occasion I raised the matter with the then Minister of Education. My right hon. Friend said that an inquiry was being held into how the two or three-mile limit could be replaced and what could be done about school transport. I gather that the inquiry has finished and that the Minister is ready to come forward with new proposals for children going two or three miles to primary or secondary schools.
The hon. Member for Belper (Mr. MacFarquhar), who is interested in this matter, asked me to mention this to the right hon. Gentleman. I willingly do so knowing that the hon. Gentleman has another engagement tomorrow morning and cannot be here tonight. This is a burning issue. I hope that the right hon. Gentleman will say when the new proposals will come forward. I hope that it will be soon.
I have had correspondence with the right hon. Gentleman's Department about


school buses. They are grossly overcrowded. I cannot believe that it is right to have 70 children in a bus going to school. I know that it is within the law to carry children under a certain age three or four to a bench, but I am sure that if the Minister looked at this he would agree that it is monstrous. I hope that something will be done about this, although it will increase the cost to the local authority in providing the transport.
Basically, I am asking the Minister to re-examine the question of the increases which have had to be imposed in the fares structure. This cannot apply only in West Derbyshire but must be happening in other areas. Increases of 50 or 60 per cent. are too much for people to pay, particularly on short journeys. I hope that the Minister and the companies will be able to find a means of alleviating this hardship to many people living in West Derbyshire.

1.42 a.m.

The Minister for Transport (Mr. Frederick Mulley): I am sure that the House understands the very real concern of the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) for his constituents, and I am grateful to him for putting his point so fairly. I know also that he has been extremely active in pursuing these matters. While I am sure that what I say tonight will not remove the concern, because my experience is that people dislike price or fare increases in any event, certainly when they have to be of the magnitude we are discussing tonight, I trust that what I say will contribute to an understanding of what is happening.
As the hon. Member knows, the pattern and level of fares are matters in the first instance for bus operators, whether they are passenger transport executives, municipal undertakings, private companies or, in the case of the Trent Motor Traction Company, the one concerned in this case, subsidiaries of the National Bus Company. They have to provide the services they are licensed to run. They have to meet the costs within the constraints of their own financial structure and with the help of whatever aid they can get from whatever source.
Apart from those matters—and I think that fares are subject to greater public and independent scrutiny than almost any other increases—the operators must satisfy the traffic commissioners that their fares are not unreasonable and that any increases applied for are within the terms of the Price Code as applied to the bus industry.
The traffic commissioners are independent statutory bodies charged with the duty, under the Road Traffic Act 1960, of administering the public service vehicle licensing system. In considering applications for licences they have to have regard to the criteria set out in the Act. Where they grant licences they have the power to attach, and usually do attach, conditions to them to ensure that the fares are not unreasonable.
Every time there is a question of a fare increase, the operator has to go to the traffic commissioners to vary the fares conditions. The regulations specify a particular form of publicity and procedures to be followed so that any person who wishes to do so may object. When a decision has been reached by the commissioners, normally, particularly in controversial matters like those the hon. Member has brought to our attention tonight, they can be challenged by the operator, or any local authority objecting, by way of appeal to my right hon. Friend the Secretary of State. That is the only way in which Ministers can intervene. That is the only occasion when the Secretary of State can intervene directly with operators or the traffic commissioners in the fixing of fares.
Although one would naturally like to help any hon. Member who brings these cases before us, the proposition by the hon. Member that one should seek to restructure the basis of the fare increases is really asking Ministers, without statutory authority, to reopen the matter and do the traffic commissioners' job again when we have no appeal, as far as I am aware, in front of us.
As to the hon. Member's other point about the retiming of services, I confess again that I have no direct day-to-day responsibility for the operating of the companies. He will understand that I am not familiar with the timetables of every bus company in the country, but I


can appreciate his feeling that by a re-timing of schedules greater convenience might be served. I think it would be reasonable—I will certainly do this—to draw the hon. Member's point to the attention of the National Bus Company and ask it to look into it. I would guess, however, that there might be other considerations.
It is very difficult to time a route, particularly in uncertain times of traffic congestion, from one end to the other. It could be that at the other end of the route the retiming might create problems of the same sort in reverse if the hon. Member's constituents were provided with retiming to meet their convenience. But certainly I will draw the point to the attention of the NBC, and ask it to see whether ways can be found to meet it. I know that the Chairman of the National Bus Company and his officials welcome very much that hon. Members should get in touch with them on matters of this kind.
Obviously the statutory processes relating to fares are regulated, as I have said, but in terms of detailed operation of the buses I know that the company welcomes discussions with hon. Members and can often, much more readily than I am able to do, give them the detail and discuss with them the reasons why this or that policy has to be pursued.
As the hon. Member very fairly said, the real problem—it is one aspect of the national problem of inflation—is that operating costs have been going up at a faster rate than prices generally. Even the recent fares increase of 34 per cent. is less than the increase in the operating costs of the company. One of the problems is that in the road passenger transport industry labour is a very important and large element of cost. It could be as much as 70 to 75 per cent. of the operating cost and, as the hon. Member will know, wages have gone up by a higher percentage even than the 34 per cent. he has mentioned.
I am sorry to say that the trend—there is no point in disguising the fact—is that fares are likely to continue to rise. It is not just a problem, as the hon. Gentleman fully appreciates, of the Trent Company or of Derbyshire. It is a national problem, and a very serious one. If there

is not enough money by way of fares in the fare box, there will be a gap between revenue and running costs. If there is not enough money to pay the wages, it has to come from somewhere, otherwise the service has to close down, because one thing is certain: people will not drive the buses unless they get paid at the end of the week. That being the case, how can the gap be met?
The Government have done something in that the whole of the duty on fuel is repaid, so that the operators have not had to suffer the cost of additional tax on fuel, and 50 per cent. of the cost of new vehicles is provided by way of grant. The Government contribute £60 million a year on these two items together. That is a sizeable sum.
Under the Transport Act 1968 the Government also contributed 50 per cent. of the expenditure of local authorities in grants to assist rural bus services. This was subsumed in the revised grant arrangements following local government reorganisation. The hon. Gentleman will know, because it was the previous Conservative administration who made these changes in local government reorganisation and grant, that local authorities have additional powers to make grants to bus operators and that county councils have new duties to develop policies to promote the provision of co-ordinated and efficient systems of public passenger transport in their areas.
As the hon. Gentleman said, very understandably, there is a local rate problem as well as, nationally, a problem of national public expenditure. As I am sure he is aware, we have suggestions from time to time from his right hon. and hon. Friends that the levels of public expenditure, both central and local, are, if anything, too high. Therefore, if there is no source of Government or local assistance to bridge the gap between what comes in in fares and what it costs to run the operation, from where is the money to come, other than by increasing fares? That is really the problem.
We have tried to assist through the transport supplementary grant system. We were especially concerned because, with mounting costs and the reluctance of many local authorities which were running their own public transport systems to put up fares, very substantial deficits were mounting. These would


have meant large demands on the rates. So, for the first time—and this is the only time we have had a grant of this kind—for this year, 1975–76, we are making a special grant towards revenue support. In each case it is based on the local authority's own estimates submitted last July. The authorities estimated that they needed £85 million at November 1973 prices. We have paid to each local authority what it estimated its deficit to be for 1974–75 plus 20 per cent. as a contribution to the increasing costs.
I appreciate that in many cases, especially in rural areas, the local authorities perhaps underestimated what would be involved, and, because of the substantial deficits which had been accumulated by the passenger transport executives and the municipal undertakings, the lion's share of the grant went in the current year—it has all been fixed now—to the conurbations. But we have made it clear that the purpose was to help them to reduce their deficits and that in future it would be right for them to seek to cover increased costs by increased fares and that the Government could not repeat the same level of support in future years.
As the hon. Gentleman will know from the public expenditure figures, this special grant has to be reduced over the next four years to half what it was in the current year in real terms. We have made it clear that in the next transport supplementary grant we shall seek to give greater weight within the total of revenue support to providing or retaining minimum public transport services in less densely populated areas. It would certainly help the hon. Gentleman's constituents if the county council concerned made this one of the items in its transport policy and programme which it will be submitting later this year.
However, I would not wish anyone to think that either from central Government or by persuasion through local government we can find the kind of money which will be necessary to meet the increased costs that are incurred in providing this service. A very substantial part of the cost must come from the people who pay. The hon. Gentleman mentioned the particular problem of old people. To some extent that is covered in some areas—it is a matter for the local authority—by one form or another of con-

cessionary fares, although the bus operators need money from the rates to compensate for the lost revenue.
There are very real problems about schoolchildren, particularly with the Trent Company. On a visit to Staffordshire I met a deputation from parish councils about this problem of children going to school. It does not fall within my responsibility. It is the responsibility of my right hon. Friend the Secretary of State for Education and Science. However, I shall see that the hon. Gentleman's remarks are brought to his attention. I understand the anxiety that the report which is my right hon. Friend's responsibility should be made available as soon as possible. The contracts for the special school journeys to which the hon. Gentleman referred are made by the local education authorities, and it is to my right hon. Friend and not to me that they are responsible.
The same point arises if the bus operators on the normal stage carrier journeys make concessions to schoolchildren. That reduces their revenue and means that perhaps fares would have to be raised to compensate or further money would have to come from ratepayers, because the local authorities have power, if they think it expedient, to subsidise the fares on routes in their area.
However, I undertake to draw my right hon. Friend's attention to the particular problems that I understand the company has posed to parents because of the fares arrangements for schoolchildren.
It is important that these matters are ventilated. We understand, particularly in the hon. Gentleman's case, the problems which are compounded by the gradients. I know Matlock and the problems there. But we also appreciate that over the whole country especially in rural areas, this matter poses very serious social problems of isolation and so on. I would very much like to be able to say that we can provide the funds so that fares do not have to rise, and so forth, but in our present economic circumstances it would be quite unrealistic to think that we could continue with rising costs without increasing charges to offset those costs.
That is really the heart of the matter. As I have said, on the detailed arrangements, often for historic reasons, the reason why one section of fares rises by


a bigger percentage than another is attributable to local circumstances. But it is for the traffic commissioners, with the opportunity and benefit of local objectors, to argue these things and to try to sort them out. It would be quite impossible to have a uniform system of fares over the whole country. Often the reason why on one route it costs more this time is that perhaps on the last occasion the largest impact on fares was on a different section. That is why we have this

particular procedure of the traffic commissioners. On a subsequent occasion perhaps the operator or the traffic commissioner, or the two together, will provide a different basis.
I shall certainly see that the points made by the hon. Gentleman are brought to the attention of the Chairman of the National Bus Company.

Question put and agreed to.

Adjourned accordingly at one minute to Two o'clock.